Ctrip Earnings: Following Another Solid Quarter, Ctrip Stock Is A Strong Buy

  • Ctrip earnings and topline continue to register strong and steady growth.
  • The company beat expectations on both revenue and earnings this quarter.
  • Ctrip registered strong growth across all metrics, making the Ctrip stock a strong buy.
Ctrip Earnings Q2 2015

Chinese travel site Ctrip (NASDAQ:CTRP) continued to grow at a blistering rate, reporting better than expected 2nd quarter earnings after the close yesterday (August 3). Ctrip earnings beat estimates for the 13th quarter in a row while the company delivered a 12th straight revenue beat. Revenue came in at $407.7 million, beating revenue estimates of $406.8 million. Ctrip had guided for revenue growth of 45-50% and hit the middle of the range at 47% YoY growth.

Total revenue increased by 9% from last quarter. Hotel reservation revenue grew 16% and transportation revenue was up by 11% from last quarter making it a cross sector topline growth.

Ctrip continued to see strong growth in hotel and airline reservations. Transportation ticketing more than doubled at 106%. Gross margin improved to 71% vs. 72% in Q2 2015, and 70% last quarter.

Numbers reported were in line or slightly better than guidance across all metrics. For the next quarter, the company expects net revenue to grow at the same annual pace of 45-50% YoY.

Ctrip stock price climbed almost $3 per share or 4% in after-hours trading, following the earnings announcement.

Financial numbers continue to be strong for the company in spite of the Chinese stock market plummeting in recent weeks. Consumer spending in China has remained strong for some American companies. Apple reported that revenue from China more than doubled this quarter from the same period last year. Starbucks also reported increased revenue from China.

Improvements in sales from China were not seen for all companies. McDonald's and Yum brands (that operates Pizza Hut, Taco Bell, and Kentucky Fried Chicken) both experienced decline in sales.

These differing reports left investors wondering if the economy is getting weaker in China or if the weakness was just for certain companies or industries. The Chinese government typically sets guidance for fast growth for the economy and reports that it was achieved, whether or not it actually was. Getting truthful, accurate numbers out of China for the economy is not easy.

Indeed, that same problem could also be true for the numbers reported by Ctrip as these numbers are unaudited financial statements. In other words, the report may be subject to manipulation should the company's accountants be asked to do so. Even though the company trades on U.S. exchanges, the U.S. has no ability to prosecute Chinese executives for lying, defrauding, etc. that would bring lengthy prison terms to American executives. For that reason, you should be careful of any information coming from China.

But if you can trust the source, then all the numbers look great, making Ctrip stock a strong buy.

Also see: Our Ctrip stock analysis video evaluating the fundamentals of the company.

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