North America

Earnings Preview: Priceline Group Q3 2017 (PCLN)

By: Craig Bowles

Overview

Priceline Group, Inc. (PCLN) is slated to report 3Q 2017 earnings after the bell on Monday, November 6th. The earnings release is expected at approximately 4:00 p.m. ET followed at 4:30 p.m. with a webcast presentation available through Priceline Investor Relations. The company is one of the top global online hotel reservation services and could therefore influence direction of the index futures and other broad market gauges.

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): Company guidance is a range of $32.40 to $34.10. The current Street estimate is $34.25. (Source: Yahoo! Finance) Consensus was $34.09 three months ago.
  • Revenues: Analysts expect an increase of 17.6% y/y to $4.34 bln. Consensus was $4.25 bln three months ago.
  • Gross Travel Bookings: Company guidance is 11% to 16% y/y growth or a range $20.491 bln to $21.414 bln.
  • Adjusted Earnings Per Share (EPS) Guidance for 4Q2017: The current Street estimate is $15.57 (range $14.17 to $18.19).
  • Revenues Guidance for 4Q2017: Analysts expect an increase of 16.3% y/y to $2.73 bln (range $2.63 bln to $2.85 bln).
  • Priceline’s P/E of 39.9 compares to a 5-year average of 28.5; P/B 8.0 compares to a 5-year average of 8.7; P/S 8.2 compares to a 5-year average of 7.7; P/CF 22.6 compares to a 5-year average of 23.2.
  • Analysts view Priceline with 25 Buy, 5 Hold, and 0 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 3,415 shares over the last three months and a net 29,315 shares in the past year. (source: NASDAQ.com) PCLN had $4 bln authorized for buybacks in February 2017 after using $1 bln in 2016 and $3 bln in 2015.
  • Priceline, Expedia (EXPE) and now Alphabet (GOOGL) are the top global online travel agents. Results could also impact other online travel agents, such as Ctrip (CTRP), Travelzoo (TZOO) and TripAdvisor (TRIP).
  • Priceline has a 1-day average price change on earnings of 7.00%. Options are pricing in an implied move of 6.38% off earnings.

Recent News

  • 10/19: JetBlue will continue to sell through Priceline and Expedia but stopped selling flights on a dozen smaller online travel agencies, according to a post on CNBC.com.
  • 10/19: Priceline invested $450 million in China-based Meituan-Dianping, according to a post on SeekingAlpha.com.
  • 10/10: Barclays has an Overweight rating on Priceline citing valuation. Sees scale and their proven model overcoming tougher comparisons for room night growth, according to a post on Barron’s.com.
  • 10/04: SunTrust Robinson Humphrey reiterated a Buy rating on Priceline citing improving hotel room rates in Europe (FX-neutral) and steady US demand growth in 3Q vs. the prior quarter. This coupled with positive Search traffic trends for all Priceline brands through Sept. and a robust pace of new property additions bode well for 3Q17 performance, according to a post on Barron’s.com.
  • 09/14: Guggenheim’s survey and research suggests that Priceline has been pulling back from the hotel metasearch in general, and maybe Trivago (TRVG) in particular. Any fading of the hotel metasearch channel could be a headwind for room nights for Priceline and a possible tailwind for Expedia, according to a post on Barron’s.com.

Summary

Analysts remain bullish on Priceline but several favor Expedia probably on expectations of investor money flows given the 2017 divergence in the two stocks. Expedia already reported disappointing results that were negatively affected by recent natural disasters in the U.S. which should have less of an impact on Priceline. Insider selling picked up the past three months with no purchases. There should be around $3 bln still available for stock buybacks. The company has beaten estimates by an average of $0.84 the last four quarters. Estimize consensus for a Non-GAAP EPS of $34.54 on revenue of $4.348 bln compares to analyst consensus of $34.25 on revenue of $4.34 bln. Gross bookings at around the $21.414 bln high side of guidance would normally be bullish. Traders would then focus on Q4 guidance.

 

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