Priceline Group Inc. (PCLN, Financial) is an online travel company that offers its customers hotel room reservations at over 295,000 hotels worldwide through the Booking.com, priceline.com and Agoda brands. In the United States, the company also offers its customers reservations for car rentals, airline tickets, vacation packages, destination services and cruises through the priceline.com brand. It offers car rental reservations worldwide through rentalcars.com. The Priceline Group provides online travel services in over 200 countries and territories in Europe, North America, South America, the Asia-Pacific region, the Middle East and Africa.
Tourism is a trillion-dollar industry, and Priceline.com Incorporated rules this space. Priceline's stock had a stunning performance over the last five years. It has been very successful in capturing the huge business opportunities presented by ecommerce in the last decade.
Second-quarter results
Second quarter gross travel bookings for were $15.0 billion (which marked an increase of 11% over a year ago).
Gross profit during the second quarter was $2.1 billion (which marked an increase of 11% increase from the prior year).
International operations contributed gross profit in the second quarter of $1.8 billion (which marked an increase of 8% from the prior year period).
Net income during the second quarter was $517 million or $9.94 per diluted share (which was $576 million or $10.89 per diluted share during the prior year quarter).
Non-GAAP net income during the second quarter was $653 million (which marked a 2% decrease from the prior year quarter).
Non-GAAP net income was $12.45 per diluted share (which was $12.51 per diluted share during the prior year quarter).
Adjusted EBITDA during the second quarter 2015 was $805 million (which was a decrease of 1% from the prior year quarter).
International gross bookings growth accelerated to 30% on a constant currency basis and the Group's total gross profit grew by about 26% on a constant currency basis.
Target for the third quarter
- U.S. gross travel bookings are expected to be about the same as third quarter 2014.
- Year-over-year increase in gross profit of approximately 3% to 10% (an increase of approximately 19%-26% on a constant currency basis).
- When aggregated, the non-GAAP adjustments are expected to increase adjusted EBITDA over GAAP net income by approximately $382 million in the third quarter 2015.
- In addition, the non-GAAP adjustments are expected to increase non-GAAP net income over GAAP net income by approximately $118 million in the third quarter 2015.
- The Group estimates GAAP net income per diluted share between $20.84 and $22.34 for the third quarter 2015.
- Adjusted EBITDA to be in the range of $1,425 million to $1,525 million.
- Non-GAAP net income per diluted share to be between $22.95 and $24.45.
(Source: Company’s Website)
Strong attributes of the third quarter
- The company got off to a strong start with a second consecutive quarter of accelerating growth in hotel room nights and rental car days booked.
- Globally, accommodation business booked 113 million room nights in the second quarter (an increase of 26% from the prior year quarter).
Being in the news
The company recently announced the acquisition of AS Digital, a leading provider of restaurant table and reservation management solutions. Based in Australia, AS Digital will expand The Priceline Group's global footprint in the digital restaurant reservation booking business, following the Group's acquisition of OpenTable in 2014. AS Digital will roll into the OpenTable brand within The Priceline Group, and serve to accelerate OpenTable's entry into the Australian market and expand its operations in Japan and across the Asia Pacific region. Terms of the deal have not been disclosed.
To keep up with the mobile savvy travel planners, PCLN recently launched an updated "Tonight-Only Deals" mobile booking platform, with an enhanced search option and expanded list of participating hotels. Tonight-Only Deals (SM) offer consumers fully revealed details such as name of hotel, price, location, star and guest ratings and amenities. The new search feature will allow consumers to easily search for Tonight-Only Deals by sorting them to the top of the list. According to new research commissioned by the brand, twice as many Americans today are using mobile travel apps to book hotel accommodations compared to 2013*, and more than one-third (35%) are doing so on a frequent basis. As travelers become increasingly more comfortable booking same-day hotels via travel apps, priceline.com is making it easier for customers to find these savings by creating a more streamlined experience. With over 1,000 new properties recently added, Tonight-Only Deals product now features 4,000+ mobile-exclusive hotel deals up to 40% off.
PCLN has recently partnered with OnStar, a provider of connectivity services for Chevrolet, Buick, GMC and Cadillac vehicles to offer drivers the service of conveniently booking hotels while traveling. OnStar Guidance plan subscribers in the U.S. and Canada, in need of a quick and easy way to reserve hotel accommodations while on the go, can now secure a stay via OnStar's new AtYourService feature. OnStar AtYourService allows customers to speak with an OnStar advisor by simply pushing the OnStar blue button inside the vehicle. Advisors can verbally provide information on hotel availability, cost, amenities and ratings to the vehicle occupants, allowing drivers to keep their hands on the wheel and eyes on the road. The advisor can then book a hotel reservation for the subscriber through priceline.com and download those directions to the vehicle's navigation system.
PCLN announced that it is going to invest an addition amount of $250 million in Ctrip.com International Ltd. (CTRP, Financial). In the year 2012, these two companies entered into partnership. These two companies have decided to continue their existing commercial partnership. CTRP is an important partner of PCLN and is positioned well in China. With the help of this partnership, PCLN will be able to cater to China in a better way and will be able to realize its long-term plan of establishing its foothold in China.
Favorable trend
There is a drop in the oil prices and so airfares may go down, too. PCLN is going to benefit from this sudden slump in airfares. This trend is definitely favorable for this online travel company. PCLN can expect to have more customers in its kitty with this drop in crude prices.
On a concluding note
The company continues consolidating its leadership position in the online travel industry. The way things are going for the company, investors have solid reasons to expect sustained growth from Priceline. Financial discipline is an important strength that has helped Priceline thrive. The company is a proactive genius that knows how to surprise and delight customers with its offerings. Priceline has ruthlessly pursued every growth opportunity to stay ahead of its competitors.
Priceline’s Booking.com continues to be the world’s largest brand for booking accommodations, with over 635,000 hotels and other accommodations on the platform (an increase from 40% over last year).
The company reported strong growth in both the top and bottom line. It is making continual development to sustain future growth. With a penetration of over 200 countries, Priceline Group is the world’s most valued travel company. I am quite bullish about this company and believe that it is going to create greater shareholder returns.
