Priceline Q3 2014 Earnings Preview

  • Priceline is slated to report its Q3 2014 numbers on Nov 4th before market hours.
  • Analysts estimate the company to report Non-GAAP EPS of $21.31 on revenue of $2.84 billion.
  • Priceline’s huge and rapidly growing international bookings share will face headwinds from the appreciating dollar, negatively impacting revenues and earnings to that extent.
  • Our Priceline stock analysis assigns a buy rating to the stock.

Priceline Q3 2014 earnings preview

Priceline (NASDAQ:PCLN), the largest online travel agent is scheduled to announce its Q3 2014 results on November 4, Tuesday before markets open. Priceline has been among our top stock picks for over a year, gaining more than 51% since its inclusion. Priceline has consistently outgrown its peers and delivered higher earnings growth fuelled by its industry leading profit margins.  Will this growth in earnings continue into Q3? What to expect from the upcoming Q3 2014 earnings report? Here is our preview into what to expect from the latest report.

Priceline balancing revenue growth and profitability.

Priceline has historically balanced revenue growth and profitability, leading to strong growth in revenues, earnings as well as cash flows. It remains one of the few internet companies to have achieved this ever-elusive balance between growth and profitability. The industry leading profit margins are a proof of the operating efficiencies of the organisation as a whole and also a reason as to why the stock has delivered significant returns to shareholders.

Priceline revenue and earnings growth chart

Priceline fundamental metrics

Priceline has grown revenues at an average rate of 39% YoY over the last twelve months (LTM) while LTM earnings have grown at 31.4% YoY. The growth in LTM free cash flow has trailed earnings growth as the company has increased its investment in plant and equipment over the LTM period.

Factors impacting Q3 performance

Priceline generated 86% of its Q3 2014 gross bookings from its international segment. The contribution of the international segment to total gross bookings has been marginally lower than 86% for the LTM period. The huge exposure to international segment will face headwinds in Q3 due to strong performance of the dollar in the recent months against other global currencies. This could lead to negative impact on revenue and earnings to that extent.

Priceline earnings history

Priceline has a strong record of beating its guidance as well as analyst consensus estimates. The company has beaten analyst consensus of EPS for over 15 consecutive quarters, highlighting the strong results the company has consistently reported. The earnings history over the last 8 quarters is summarized in the below table.

Quarter

EPS consensus ($)

Actual EPS ($)

Revenue consensus ($ in billions)

Actual revenue ($ in billions)

EPS beat

Revenue beat

Q214

11.97

12.51

2.14

2.12

4.5%

-0.5%

Q114

6.86

7.81

1.63

1.64

13.8%

0.6%

Q413

8.22

8.85

1.52

1.54

7.7%

1.1%

Q313

16.2

17.3

2.21

2.27

6.8%

2.8%

Q213

9.41

9.7

1.65

1.68

3.1%

1.9%

Q113

5.25

5.76

1.27

1.30

9.7%

2.9%

Q412

6.54

6.77

1.18

1.19

3.5%

0.8%

Q312

11.81

12.4

1.66

1.71

5.0%

3.0%

Average

9.53

10.14

1.66

1.68

6.3%

1.5%

The company has delivered an average earnings surprise of 6.3% and average revenue beat of 1.5% over the last 8 quarters.

Q3 2014 guidance and Consensus estimates

The company has guided to Q3 2014 revenue growth of 15% to 25%. The current analyst consensus estimate of $2.82 billion implies a 28% YoY growth. The Non-GAAP earnings per share (EPS) consensus estimate is $21.08 per share, which is at the higher end of the management’s guided range of $19.6 to $21.1 per share.

Q3 2014 lower guidance

Q3 2014 higher end guidance

Q3 2014 Guidance mid-point

Consensus estimate

Revenue (in billions of $)

2.61

2.83

2.72

2.82

Non-GAAP EPS ($)

19.6

21.1

20.35

21.08

Conclusion

Agency revenues contributed 69% of total revenues in Q3 2014, up from 63% in Q1 2014 and solid growth in this segment will significantly impact the overall revenue growth of Priceline. Expedia recently reported a solid Q3 2014 performance, with a 21% YoY growth in its domestic as well as international room nights growth. The hotel bookings make up a lion’s share of Priceline’s topline, which could lead to Priceline once again topping analyst estimates for Q3 2014. We reiterate our positive long term outlook on Priceline, which is reflected in our Priceline stock analysis and also our valuation videograph below.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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