Booking Beat Q4 Earnings Estimates but Missed Revenue Estimates

Fourth-quarter performance

Booking Holdings (BKNG) reported mixed results for the fourth quarter of 2018, wherein its bottom-line results came in well ahead of analysts’ estimates, but the top-line missed estimates. However, on a YoY basis, both marked substantial improvements.

The company reported non-GAAP EPS of $22.49, which surpassed the Wall Street consensus estimate of $19.42 and registered a YoY increase of 33.4%. The robust YoY growth in its bottom line was mainly driven by higher revenues, lower taxes, and the reduced outstanding share count.

Booking Beat Q4 Earnings Estimates but Missed Revenue Estimates

The company’s fourth-quarter revenues increased 14.6% YoY to $3.2 billion mainly driven by a strong performance across all its business segments including Agency, Merchant, and Advertising and Other. The Agency division’s revenues increased ~9%, Merchant unit sales grew 37.7%, and Advertising and Other business revenues improved by 14.5%.

Additionally, a robust 13% YoY increase in room nights booked also aided the overall revenue growth in the fourth quarter. However, a sluggish performance across rental car days and airline ticket bookings slightly offset the top-line growth. Adjusted EBITDA for the quarter came in at $1.26 billion, which surpassed the analysts’ estimate of $1.22 billion and registered a YoY increase of 17.4%. The adjusted EBITDA margin also improved 30 basis points to 39.1%.

A lower tax rate also aided Booking’s strong bottom-line results. The effective non-GAAP tax rate for the fourth quarter came in at 11.3%, which according to the company was substantially lower than the year-ago quarter’s level. The number of shares outstanding also declined to 46.6 million from 48.7 million in the year-ago quarter, which also boosted Booking’s fourth-quarter EPS.

Balance sheet and share repurchases

The company ended 2018 with cash, cash equivalents, and short-term investments worth $6.28 billion. During the last year, Booing generated operating and free cash flows of $5.33 billion and $4.9 billion, respectively. The company continued enhancing shareholder wealth through share buybacks. In 2018, Booking repurchased $5.97 billion worth of its common stock.

Major online travel agencies (IYW) TripAdvisor (TRIP) and Expedia (EXPE) have already reported their fourth-quarter 2018 results. TripAdvisor’s fourth-quarter EPS jumped 350%, while Expedia recorded 48% YoY growth in its adjusted EPS.

Booking’s other competitor International (CTRP) is expected to report its fourth-quarter results in March. Wall Street analysts project the company to report a loss per share of $0.22 compared to its earnings of $1.56 in the year-ago quarter.