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Booking Holdings' (BKNG) Q3 Earnings Miss, Revenues Beat

Zacks Equity Research
·5-min read

Booking Holdings Inc. BKNG reported third-quarter 2020 non-GAAP earnings of $12.27 per share, which missed the Zacks Consensus Estimate by 23.2%. Further, the figure plunged 73% year over year.

Nevertheless, the bottom line reversed the loss of $10.81 per share reported in the previous quarter.

Revenues of $2.64 billion surpassed the Zacks Consensus Estimate of $2.61 billion. The top line also surged significantly from $630 million in the prior quarter.

However, the metric declined 48% on reported basis and 49% on constant currency basis from the year-ago quarter.

The coronavirus pandemic remained the biggest headwind during the third quarter. COVID-19-induced disruptions in the global travel industrynegatively impacted the company’s results.

Booking Holdings witnessed a year-over-year decline of 55.6% and 9.3% in the rental car days and airline tickets unit, respectively, in the third quarter.

Additionally, the company witnessed sluggish agency, merchant, and advertising and other business revenues during the reported quarter.

Moreover, softness in the travel trends in Asia and especially, all over Europe were a major concern.

Nevertheless, the company witnessed improvement in the North American region during the reported quarter.

Notably, the booked room nights number, which was 127 million in the third quarter, plunged 43.1% from the prior-year quarter but improved significantly from 28 million in the last reported quarter.

Booking Holdings anticipates this pandemic situation to persist as a major headwind to the travel industry in the near term.

The stock has lost 13.9% on a year-to-date basis against the industry’s rally of 66.2%.

Nevertheless, the company’s highly variable cost structure and strong liquidity position are expected to help it navigate the crisis scenario. Moreover, its solid cost-cutting initiatives are an added positive.

 

Top Line in Detail

Booking Holdings generates bulk of revenues from the international markets wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 31.7/65.3% in the third quarter (previous quarter’s split was 38.9/56.7%)

Merchant revenues were $837 million, down 36.2% year over year.Further, Agency revenues were $1.7 billion, down 49.8% on a year-over-year basis.

Advertising & Other revenues were $80 million (3% of total revenues), decreasing 72.6% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.

Bookings

Booking Holdings’ overall gross bookings totalled $13.4 billion, down 47.1% year over year on reported basis. Further, the figure was down 48% inconstant currency from the year-ago quarter.

Additionally, gross bookings lagged the Zacks Consensus Estimate of $13.5 billion.

Merchant bookings were $3.9 billion, down 46.1% from the prior-year quarter. Further, agency bookings plunged47.4% year over year to $9.5 billion.

Booking Holdings Inc. Price, Consensus and EPS Surprise

Booking Holdings Inc. Price, Consensus and EPS Surprise
Booking Holdings Inc. Price, Consensus and EPS Surprise

Booking Holdings Inc. price-consensus-eps-surprise-chart | Booking Holdings Inc. Quote

Operating Results

Adjusted EBITDA in the third quarter was $1 billion, slumping 60% from the prior-year quarter.

Per management, operating expenses were $2.3 billion, down 12.9% on a year-over-year basis. As a percentage of revenues, the same expanded significantly to 88.1% in the reported quarter from 52.9% in the previous quarter.

Further, the company generated operating income of $315 million,which plummeted 86.7% year over year.

Balance Sheet & Cash Flow

As of Sep 30, 2020, cash and cash equivalents was $11.2 billion, up from $10.4 billion as of Jun 30, 2020.

At the end of the third quarter, Booking Holdings had $10.8 billion of long-term debt, up from $10.6 billion at the end of the second quarter.

During the reported quarter, the company generated $920 million worth cash from operations compared with $122 million of cash utilized in operations during the prior quarter.

Further, free cash flow was $848 million in the third quarter.

Zacks Rank & Stocks to Consider

Booking Holdings currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Himax Technologies HIMX, NVIDIA NVDA and Covetrus CVET, all carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Covetrus is set to report Nov 10, while Himax and NVIDIA are scheduled to report earnings on Nov 12 and Nov 18, respectively.

The long-term earnings growth rate for NVIDIA and Covetrus is currently pegged at 20.1% and 31.6%, respectively. Meanwhile, Himax’s current-year earnings of 13 cents per share, indicate year over year growth of 285.7%.

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
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