PCLN Stock: Priceline Earnings Poised for a Positive Surprise

by Dan Burrows | February 19, 2014 11:17 am

If the rest of the online travel industry is any guide, Priceline.com (PCLN[1]) is poised to post better-than-expected results when it reports quarterly results Thursday … and that could send PCLN stock to even greater heights.

PCLN-stock-priceline-earningsOnline travel companies have been reporting strong results this earnings season, and their stocks have benefited as a result — sometimes handsomely. So it stands to reason that if Priceline earnings exceed analysts’ estimates, PCLN stock will also get a boost.

Orbitz Worldwide (OWW[2]) released better-than-expected results last week, which lifted sector shares, as well as its own heavily shorted stock. Expedia (EXPE[3]) also produced top- and bottom-line results that beat Wall Street estimates. And although TripAdvisor (TRIP[4]) missed the FactSet-surveyed analyst consensus for earnings by a penny, revenue and other metrics came in ahead of plan — good enough for TRIP stock to catch an analyst upgrade and to hit an all-time high.

Now it’s up to PCLN stock to keep the party going — something the market leader in a hot-growth industry should be able to do easily.

After all, Priceline earnings haven’t disappointed in a long time. Priceline has eclipsed Street revenue projections for five consecutive quarters, and more importantly, anyone holding PCLN stock has seen the company beat earnings estimates for at least eight straight quarters.

And when PCLN beats, it beats by a lot. Last quarter, Priceline earnings exceeded Wall Street’s average estimate by $1.15 a share. Prior to that, PCLN bested analysts’ average forecast by 34 cents a share. Indeed, over the last four quarters, Priceline earnings have beaten Street estimates by at least 23 cents a share.

PCLN Stock — Robust Profit and Sales Growth Expected

For the most recent quarter, analysts project Priceline earnings to come in at $8.29 a share, up from $6.77 a year ago. Revenue is forecast to rise 27% year-over-year to $1.52 billion. And since Priceline always beats estimates, the Priceline earnings whisper number is currently north of the $8.29 average estimate.

PCLN stock has been rising ahead of earnings in anticipation of another strong showing. In the third quarter, investors in Priceline were treated to the company gaining market share in both domestic and international markets, which boosted sales growth rates.

Additionally, bookings rose both sequentially and year-over-year, and gross margins expanded, thanks partly to higher average daily rates at hotels.

Despite the less-than-robust environment for consumer spending, the online travel industry continues to grow quickly. As the market leader, the Street expects Priceline to lead the way.

But that hasn’t been the case so far this year.

PCLN stock is up 12% for the year-to-date, beating the S&P 500 by a wide margin, since the broad market index is flat for the year. But PCLN does lag its peers. TRIP stock and EXPE are up 13% so far in 2014. And OWW has gained a sector-best 22%, with most of that coming after the surprisingly strong earnings report squeezed out some shorts.

If the online travel sector is to keep putting up these sorts of gains, it needs Priceline to punch its weight. After all, PCLN is by far the biggest name in the business, with a market cap of $67 billion at a share price of nearly $1,300. By comparison, No. 2 EXPE stock has a market cap of $10 billion at $78.50 a share.

With the online travel business in expansion mode and Priceline’s history on earnings, it’s a safe bet that the company will serve up a Street-beating report, and PCLN stock will eventually catch up to the competition.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

  1. PCLN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PCLN
  2. OWW: http://studio-5.financialcontent.com/investplace/quote?Symbol=OWW
  3. EXPE: http://studio-5.financialcontent.com/investplace/quote?Symbol=EXPE
  4. TRIP: http://studio-5.financialcontent.com/investplace/quote?Symbol=TRIP

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