Why Did Priceline Stock Rally after the 2Q16 Results?



2Q16 in a nutshell

Priceline Group (PCLN) reported its second quarter financial results after market hours on August 4, 2016. PCLN beat analyst estimates for earnings, driven in particular by a strong increase in bookings. However, it missed analysts’ revenue estimates. Gross travel bookings increased by 19% YoY (year-over-year) to $17.2 billion, driven mainly by an increase in room units sold.

The company reported earnings of $13.93 per share (12% increase YoY), which came ahead of analyst estimates of $12.69 per share. The top line stood at about ~$2.6 billion (12% increase YoY), up from ~$2.3 billion in the same period one year ago. This was lower than the consensus estimate of ~$2.8 billion.

However, both earnings and revenue were better than PCLN’s guidance of a 7%–14% revenue growth and EPS (earnings per share) of $11.6–$12.5 issued in May 2016.

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Stock movement

Priceline’s (PCLN) stock shot up by about 5% in aftermarket trading, after the company released its 2Q16 earnings. It closed with a 4% gain on August 5, 2016. The company also issued a strong guidance for 3Q16.

By contrast, competitors Expedia (EXPE) and TripAdvisor (TRIP) were down on subdued earnings. (For details, read “Have Terror Attacks Taken a Toll on Online Travel Agent Expedia?“ and “TripAdvisor Investors Didn’t Enjoy a Happy Voyage in Q2.”)

EXPE fell by 0.25%, and TRIP fell by 4.4%. Ctrip.com (CTRP) joined PCLN’s positive movement, rising by 0.26%. The broader market as tracked by the SPDR S&P 500 ETF Trust (SPY) also rose by 0.79%, largely driven by the Bank of England’s rate cut.

Series overview

In this series, we’ll look at Priceline’s 2Q16 performance. We’ll also analyze key metric trends, review the company’s guidance for 2016, and take a look at analyst estimates for PCLN. We’ll wrap up the series with a discussion on PCLN’s valuation multiple.

Let’s start by looking at Priceline’s business performance.


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