Earnings Preview: Priceline Q1 2014

May. 5.14 | About: Priceline Group (PCLN)

Summary

Priceline.com is slated to report Q1 2014 earnings before the bell on Thursday, May 8th.

Adjusted Earnings Per Share (EPS): Company guidance is a range of $6.35 to $6.85. The current Street estimate is $6.91 (range $6.44 to $8.10).

Revenues: Analysts expect an increase of 25.3% y/y to $1.63 bln (range $1.56 bln to $1.71 bln).

By Craig Bowles

Overview

Priceline.com (NASDAQ:PCLN) is slated to report Q1 2014 earnings before the bell on Thursday, May 8th. The earnings release is expected at approximately 7:00 a.m. EST, followed at 7:30 a.m. with a webcast presentation available through Priceline Investor Relations. This is, among other things, the top global online hotel reservation service, and could therefore influence direction of the index futures and other broad market gauges.

Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share: Company guidance is range of $6.35 to $6.85. The current Street estimate is $6.91 (range $6.44 to $8.10) (Source: Yahoo Finance).
  • Revenues: Analysts expect an increase of 25.3% y/y to $1.63 bln (range $1.56 bln to $1.71 bln).
  • Gross Travel Bookings: Company guidance is 23% to 33% y/y growth, which translates to $11.258 bln to $12.173 bln, so the midpoint is $11.716 bln. Analysts expect $12.033 bln (Source: Zacks Institutional Services).

Guidance for Adjusted Earnings Per Share (EPS) and Revenue:

  • Adjusted Earnings Per Share Guidance for 2Q2014: The current Street estimate is $12.26 (range $11.35 to $14.49).
  • Revenues Guidance for 2Q2014: Revenues are seen rising 25.7% y/y to $2.11 bln (range $2.01 bln to $2.23 bln).
  • Priceline insiders sold 76,000 shares over the last six months, which is nearly equal to the $1 billion stock buyback the company announced last summer.
  • Priceline and Expedia (NASDAQ:EXPE) are the top two global online travel agents with similar gross-hotel bookings (US$30bn), and results could also impact other online travel agents, such as Travelzoo (NASDAQ:TZOO), TripAdvisor (NASDAQ:TRIP) and Orbitz Worldwide (NYSE:OWW). The growth of Expedia and Priceline are threatening to make the smaller outlets irrelevant to the industry, according to some analysts.
  • Competitor, Expedia reports the week before Priceline. Expedia reported gross bookings increased 29%.
  • Priceline shares have a 1-day average price change on earnings of 10.93%. Options are pricing in an implied move of 6.59% off earnings.

Recent News

  • 04/29 Priceline said it has seen a significant business shift to mobile platforms, and believes that mobile bookings present an opportunity for growth, according to a post by Market Realist.
  • 04/28 Priceline earns the majority of its revenues from the agency model, under which third-parties such as hotel suppliers set the rates, while Priceline earns a commission on the transaction, according to a post by Market Realist.
  • 04/13 Google (GOOG GOOGL) takes on Priceline and Expedia as it expands its travel offerings, according to a post on TheFool.com.
  • 04/09 Cantor Fitzgerald reiterated a Buy rating and raised the price target to $1400. citing Priceline's Q1 bookings should meet or exceed the high end of the company's guidance, according to a post on StreetInsider.com.

Technical Review

Priceline doubled in just over one year, before slipping back below $1200 on the retest of the 200-day moving average. $1200 acted as a ceiling for the December/January balance area. 2014 price action is somewhat similar to 2012, which would limit the upside to around $1250 and downside to $1000, if continued until October. Above $1250 has limited resistance other than the all-time high. (Chart courtesy of StockCharts.com)

Summary

Nearly all analysts have Buy ratings on Priceline.com, 10% have a Hold rating, and zero have the stock as a Sell. The company beat estimates by at least 39c in each of the last four quarters, so analysts' consensus is 32c above the midpoint of guidance. The range of estimates reach as high as $8.10, and traders are as optimistic as everyone else, so the company would probably need to produce earnings close to 30c above the high side of guidance to draw attention. Revenue above $1.66 bln would be above the midpoint of expectations and allow traders to focus on gross bookings, where analysts expect closer to the high side of guidance.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.