Priceline (PCLN) stock is soaring on Wednesday, with shares surging as much as 8% in the wake of a stellar second-quarter earnings report, setting an all-time high for PCLN stock.
PCLN is the latest online travel company to soar during earnings season. Last week Expedia (EXPE) also rallied after a phenomenal quarter, and shares of the Chinese booking site eLong (LONG) shot 20% higher Tuesday after a buyout offer from Tencent (TCEHY).
Let’s take a look at second-quarter results and what PCLN stock still has going for it.
Revenue, Earnings Beat
Revenue grew 7.4% year-over-year to $2.28 billion in the quarter — a modest notch above the $2.27 billion consensus estimate. But earnings were the real differentiator here, as PCLN reported $12.45 vs. expectations for $11.98 per share.
Guidance, although more bullish than bearish, was mixed. While PCLN sees third-quarter revenue growth between 1% and 8% — below analyst calls for 9% growth — the midpoint of its earnings-per-share range was higher than Wall Street expected. Management guided between $22.95 and $24.45 per share in the current quarter, a midpoint of $23.70, besting Wall Street’s $23.32 consensus.
With shares up nearly 500% in the last five years, Priceline stock has benefited from being a leader in a burgeoning industry. The convenience of online travel booking has made the travel agent profession more or less go the way of the dodo.
Not only is the industry taking flight, it’s consolidating; historically, oligopolies tend to work out pretty well for industry bigwigs. PCLN takes an active role in that consolidation process, and if you look at the track record it’s clear that the strategy is working.
Booking.com and Kayak — both acquired by Priceline — have been driving the PCLN stock price higher for years now. Booking for hotel rooms and rental cars fueled Priceline’s results in the most recent quarter, growing by 26% and 20.1%, respectively.
Speaking of acquisitions, last year PCLN bought restaurant reservations company OpenTable (OPEN) for $2.6 billion, hoping to add another growth vertical to its portfolio of related brands.
With the economy still rebounding and a strong dollar serving as a tailwind for American travelers, it’s no surprise PCLN stock continues to outperform. To hedge itself, though, Priceline takes stakes in international operators as well; and in May, PCLN increased its stake in Chinese online travel firm Ctrip.com (CTRP) just as rival Expedia sold off its position in eLong to CTRP.
That gives Priceline an indirect interest in eLong, the company Tencent offered to buy for a 24% premium yesterday.
If you’re a player in the online travel and booking space, give yourself a pat on the back. You’re good.
If you’re an investor, PCLN stock still looks like a good deal. I know, trading for more than $1,300 a share makes it sound rather expensive, but with a forward price-to-earnings of just 20, you get what you pay for.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
