Will Agency Growth Aid Booking Holdings Q1 Earnings?

Booking Holdings Inc. BKNG is slated to report first-quarter 2018 earnings on May 9. In the last reported quarter, the online travel company delivered a positive earnings surprise of 19.41%.

The surprise history has been impressive in Booking Holdings' case. The company surpassed estimates in each of the trailing four quarters, with an average four-quarter positive surprise of 10.05%.

Strong Agency Revenues to Drive International Results

Booking Holdings generates bulk of its revenues from international markets where the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 19/74% in the fourth quarter.

In the fourth quarter, agency revenues decreased 41.2% sequentially but increased 19.4% from the year-ago quarter. We expect agency revenues to increase in the to-be-reported quarter, driven by strength across all its platforms.

Agoda and Rental Cars to Boost Merchant Revenues

In the to-be-reported quarter, merchant revenues are also expected to grow, driven by strength across agoda.com and rentalcars.com. While agoda.com is likely to benefit from discounting in markets, rentalcars.com is expected to ride on continuous operational improvements.

In the fourth quarter, merchant revenues were down 25.7% sequentially but up 15.6% year over year.

Strong Room Night Growth

Also, room night growth is expected to improve in the quarter to be reported, driven by diverse inventory and brand recognition that tend to balance out macro uncertainties related to any one market, as well as growing competition from local and international players.

In the last reported quarter, room nights volume increased 16.8% on a year-over-year basis. Also, rental car days increased 5.4% and airline tickets were up 3.1% from the year-ago quarter.

For the soon-to-be-reported quarter, Booking Holdings expects room nights booked to grow 8-12% and total gross bookings to increase 14.5-18.5% year over year (6-10% on a constant currency basis). The company expects adjusted EBITDA in the range of $680-$705 million.

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