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Booking Holdings (BKNG) Up 12.9% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Booking Holdings (BKNG). Shares have added about 12.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Booking Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Booking Holdings Q3 Earnings Beat Estimates

Booking Holdings reported non-GAAP earnings of $53.03 per share for third-quarter 2022, beating the Zacks Consensus Estimate by 7.3%. Further, the figure increased 41% from the year-ago quarter’s level.

Revenues of $6.05 billion surpassed the Zacks Consensus Estimate of $5.91 billion. The top line improved 29% year over year on a reported basis and 47% on a constant-currency (cc) basis.

Improving travel demand and booking trends from the year-ago quarter were tailwinds.

Booking Holdings witnessed growth of 24.9% in rental car on a year-over-year basis. BKNG also experienced 45.1% year-over-year growth in the airline tickets unit in the reported quarter.

Booked room night number, amounting to 240 million in the third quarter, surged 31.5% from the prior-year quarter’s level.

Booking Holdings witnessed strong growth across its agency, merchant, and advertising and other businesses in the reported quarter.

However, headwinds related to the coronavirus pandemic and macroeconomic uncertainties remain overhangs for BKNG.

Top Line in Detail

Booking Holdings generates the bulk of revenues from international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 43.2/52.9% in the third quarter (the previous quarter’s split was 41/54%)

Agency revenues were $3.2 billion, up 11.7% year over year. Merchant revenues were $2.6 billion, up 61.2% on a year-over-year basis.

Advertising & Other revenues were $235 million (3.9% of total revenues), increasing significantly from $25.7 million in the year-ago quarter.

Bookings

Booking Holdings’ overall gross bookings totaled $32.12 billion, which increased 35.6% on a reported and 52% on a cc basis from the year-ago quarter’s respective readings.

Total gross bookings surpassed the Zacks Consensus Estimate of $30.14 billion.

Merchant bookings were $14.51 billion, up 64.6% from the prior-year quarter’s level.

Agency bookings were $17.6 billion, rising 18.4% from the prior-year quarter’s level.

Operating Results

Adjusted EBITDA in the reported quarter was $2.7 billion, which improved 25.9% year over year.

Adjusted EBITDA margin was 43.9%, which contracted 120 basis points (bps) from the prior-year quarter’s level.

Per management, operating expenses were $3.5 billion, up 30.4% on a year-over-year basis. As a percentage of revenues, the figure expanded 40 bps from the year-ago quarter’s tally.

Booking Holdings generated an operating margin of 42.7%, which contracted 40 bps year over year.

Balance Sheet

As of Sep 30, 2022, cash and cash equivalents were $9.02 billion, down from $11.8 billion as of Jun 30, 2022. Short-term investments were $116 million at the end of the quarter.

Account receivable amounted to $2.3 billion in the reported quarter compared with $2.2 billion in the previous quarter.

At the end of the third quarter, Booking Holdings had $7.9 billion of long-term debt compared with $8.2 billion at the end of the second quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -10.37% due to these changes.

VGM Scores

Currently, Booking Holdings has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Booking Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Booking Holdings is part of the Zacks Internet - Commerce industry. Over the past month, Amazon (AMZN), a stock from the same industry, has gained 6.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Amazon reported revenues of $127.1 billion in the last reported quarter, representing a year-over-year change of +14.7%. EPS of $0.20 for the same period compares with $0.31 a year ago.

For the current quarter, Amazon is expected to post earnings of $0.23 per share, indicating a change of -83.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.6% over the last 30 days.

Amazon has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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