Market Overview

Priceline.com Earnings Preview: Q1 EPS Expected to Be 32% Higher

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Priceline.com (NYSE: PCLN), which saw its price target at JP Morgan raised yesterday, is scheduled to report first-quarter 2012 results tomorrow May 9, after the markets close.

Investors will be looking to see whether strong growth in the company's global hotel business in Asia and new markets was enough to offset the expected weakness, including rising cancellation rates, resulting from the economic uncertainty in Europe. In each of the past four quarters, the company has seen double-digit percentage year-over-year revenue growth, as well as increasing profit for three quarters in a row.

See also: JP Morgan Raises PO on Priceline.com to $810

Expectations

Analysts predict that Priceline will report per-share earnings of $3.94 for the quarter and say that revenue totaled $1.0 billion. That would be up from $2.66 per share and $809.3 million in sales in the same period of last year. The EPS estimate has inched up a couple of pennies in the past 60 days. And note that analysts have underestimated Priceline's EPS for more than ten quarters -- the positive surprise was 6.3% in the fourth quarter.

Back in that fourth-quarter report, the company said it earned $226 million, or $4.41 a share, compared with $2.66 per share in the same period of the previous year. Revenue was more than 26% higher to $991 million. Both sales and EPS easily surpassed consensus expectations. Bookings were the key to the strong results, with hotel bookings for the quarter up 53% and total bookings 52% higher year over year.

Looking ahead to the current quarter, analysts so far expect to see sequential and year-over-year growth of both per-share earnings and revenues. At this point, the full-year forecast has EPS up more than 25% from the previous year and revenue more than 27% higher.

The Company

Priceline.com is an online travel company that offers travel services, including hotel rooms, airline tickets, vacation packages, car rentals, cruises and destination services. Its brands include priceline.com, Booking.com, Agoda and Rentalcars.com. The company was founded in 1997 and is headquartered in Norwalk, Conn. It is a component of the S&P 500 and has a market cap of $36.7 billion.

Competitors include Expedia (NASDAQ: EXPE), Orbitz Worldwide (NYSE: OWW) and privately held Travelocity.com. Expedia shares jumped to an all-time high following better-than-expected first-quarter results. Last week, Orbitz posted a narrower net loss. Both companies attributed their results to strength in hotel bookings. And TripAdviser (NASDAQ: TRIP) shares also jumped on strong first-quarter results.

See also: Expedia Continues Rallying After Earnings Beat and TripAdvisor Soars on Q1 Earnings Report

During the three months that ended in March, Priceline.com authorized the repurchase of up to $200 million in common shares. The company launched the Android version of its Tonight-Only Deals hotel reservations service, and it announced the end of the popular Priceline Negotiator, a character played by William Shatner, in the company's national television advertising.

Performance

Priceline's long-term earnings per share growth forecast is 22.2% and the return on equity is 48.2%. Its operating margin is much higher than the industry average. Its forward earnings multiple is lower than the industry average P/E ratio. Nineteen of 24 analysts who follow the stock recommend buying shares. Their mean price target is more than 5% higher than the current price, and the high price target is about 16% higher.

Shares have traded mostly between $700 and $750 since late March, though the stock hit a multiyear high of $774.96 in April. At $737.65 the share price is now almost 58% higher than at the beginning of the year. The price has been above the 50-day and 200-day moving averages since mid January. Over the past six months, the stock has outperformed Expedia and Orbitz Worldwide, as well as the broader markets.

See also: Apple and Priceline Charts Look Familiar

ACTION ITEMS

Bullish: Investors interested in exchange traded funds invested in Priceline might want to consider the following trades:

  • PowerShares Dynamic Leisure & Entertainment (NYSE: PEJ) is more than 17% higher year to date.
  • PowerShares QQQ (NASDAQ: QQQ) is more than 16% higher year to date.
  • Consumer Discretionary Select Sector SPDR (NYSE: XLY) is more than 15% higher year to date.
  • PowerShares NASDAQ Internet (NASDAQ: PNQI) is more than 15% higher year to date.
Bearish:

Traders may prefer to consider these alternative positions:

  • TripAdviser (NASDAQ: TRIP) is up more than 62% year to date.
  • Youku (NYSE: YOKU) is up more than 51% year to date.
  • Move (NASDAQ: MOVE) is up about 35% year to date.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
 

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