Tuesday, February 16, 2010

Priceline.com (NASDAQ: PCLN): Q4 Earnings Preview 2009

Priceline.com (NASDAQ: PCLN) is scheduled to release its fiscal fourth-quarter 2009 financial results after the closing bell on Wednesday, February 17, 2010. Analysts, on average, expect the company to report earnings of $1.68 a share on revenue of $529.79 million. In the year ago period, the company posted earnings of $1.29 per share on revenue of $406.04 million.

Priceline.com Incorporated operates as an online travel company principally in the United States, Europe, and Asia. It provides various travel services, including airline tickets, hotel rooms, car rentals, vacation packages, cruises, and reservation services. The travel industry is continuing to utilize online services to outsource the excess capacity and the company's profitability has expanded rather significantly.

In the preceding third quarter, the Norwalk, Connecticut-based company reported that its net income surged to $318.98 million or $6.42 per share, compared to $84.49 million or $1.74 per share in the year-ago quarter.Excluding the effect of the tax benefit, the company's pro forma net income applicable to common stockholders of priceline.com rose to $173.34 million or $3.45 per share from $116.79 million or $2.39 per share in the same quarter last year. Revenue jumped 30.1% to $730.66 million from $561.61 million in the prior-year quarter. Analysts, on average, expected the company to earn $2.92 per share on revenue of $693.97 million.The gross margin was 59.4%, up 884 basis points (bps) from the previous quarter’s 50.6%. The gross margin was up 312 bps from the year-ago quarter.

In the third quarter, gross bookings increased in both domestic and international markets, international bookings saw stronger growth. Domestic bookings increased 3.6% sequentially and 24.9% year over year compared to international bookings growth of 21.9% and 37.8% in the previous and year-ago quarters, respectively. The strength in international bookings was due to geographic expansion, increase in hotel supply and growth in new markets.

For the fourth quarter, the company expects pro forma net income to be in the range of $1.52 and $1.62 per share, and GAAP net income to be between $1.06 and $1.16 per share for the fourth quarter. The company anticipates year-over-year increase in revenue of about 24% to 28% with an increase in total gross travel bookings of about 30% - 40%, an increase in international gross travel bookings of about 50% - 60% and a year-over-year increase in domestic gross travel bookings of about 15%.

The company has benefited from the growing trend of online transactions, strong international growth and recovery in travel demand. However, the recent strengthening of the dollar against the Euro may erode the company's bottomline. Still, the impact of the strong dollar could be outweighed by ongoing strength in international room night volume and better-than-expected room rate trends."

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 20.08 and PEG Ratio (5 yr expected) of 1.23. In terms of stock performance, Priceline.com shares have gained 189 percent over the past year.

Full Disclosure: None.
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