Priceline reports Q1 earnings this afternoon.
Here’s a preview from JPMorgan analyst Imran Khan:
- We think Priceline will report a strong Q1. Based on Smith Travel Research and Expedia and Orbitz earnings, we think ADRs recovered better than expected (roughly flat ADRs). Furthermore, we note that both Expedia and Orbitz reported strong int’l results, with Expedia’s up 33% constant currency and Orbitz’s up 25% constant currency. Over the past 4 quarters, Priceline’s local currency int’l gross bookings growth has outperformed Expedia’s local currency growth with a range of 2400 to 4250 bps. Assuming PCLN outperforms at the midpoint of the range, that would equate to PCLN growing 66% Y/Y in 1Q’10 compared to our 64% local currency int’l gross bookings growth estimate.
- We feel that guidance will be the most important metric to watch. We are concerned that 2Q guidance may be conservative given 3 factors: 1) significant declines in the value of the Euro, 2) Political unrest in both Greece and Thailand, and 3) the travel disruptions caused by the Iceland volcanic eruption. As a result, we feel that gross bookings, revenue, and margins may all be guided down from run-rate levels.
- However, nothing is structurally at fault within Priceline. While we see some short-term challenges, we expect some of them to be mitigated by continued market share gains. We still feel confident that Priceline can achieve F’10 earnings growth of 30%+. Although, 2Q margins may be pressured due to increased costs associated with rebooking reservations for the volcano, we feel that the impact on full year gross bookings and revenue will be mostly insignificant as many of the trips will be rebooked and as canceled hotel reservations will be offset by extended stays from stranded travellers. Furthermore, we note that rising int’l ADRs will aid gross booking, revenue, and margin performance.
- Outlook for 1Q’10. We are modelling 1Q gross bookings growth of 48% Y/Y, revenue of $586M, EBITDA of $108M, and pro forma EPS of $1.64. Consensus revenue, EBITDA and EPS estimates are $596M, $107M, and $1.66.
- Outlook for 2Q’10. Our model calls for gross bookings growth of 37%, and revenue, EBITDA, and EPS of $723M, $198M, and $3.05, vs. consensus of $756M, $185M, and $2.82. We do not expect full year guidance to be provided.
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