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Is a Beat in Store for Priceline (PCLN) in Q2 Earnings?


The Priceline Group Inc. PCLN is slated to report second-quarter 2017 earnings on Aug 8 after the bell.

The company is one of two leading players in a highly fragmented online travel booking market, the other one being Expedia (EXPE). But the two companies are different because Priceline generates most of its revenues overseas, particularly Europe, while Expedia is more focused on North America. Both companies are expanding geographically.

In terms of share price movement, Priceline has underperformed the industry on a year-to-date basis. While the industry gained 47.4%, the stock rallied 38.3%.

Last Quarter Recap

Priceline’s first-quarter 2017 earnings not only came ahead of the Zacks Consensus Estimate but also increased year over year. Revenues however missed the consensus mark by a slight margin but were up year over year.

On a year-over-year basis, the agency business showed strong momentum but the merchant business was lumpy. Room nights and Rental cars performed impressively. Airline tickets continue to remain weak.

Second Quarter Expectations

For the second quarter of 2017, Priceline expects room nights booked to grow 16-21% and total gross bookings to grow 12-17% year over year (15-20% on a constant currency basis).

Priceline expects gross profit dollars to increase 14%-19% (17-22% on a constant currency basis), with adjusted EBITDA in the range of $860-905 million.

Pro forma earnings per share (EPS) are expected to come in the range of $13.30-$14.00. The Zacks Consensus Estimate is pegged at $15.49. GAAP EPS is expected in the range of $12.55-$13.25.

What’s in Favor of Priceline?

The U.S. Commerce Department estimates international travel to the U.S. to grow at a CAGR of 3.3% from 2016 to 2021. Inbound travel volumes from Mexico, China, Canada, India and South Korea will be the highest during this period. Visitor volume in 2017 is expected to be up 2.4% from 2016. Since it is a major international player, these trends play into Priceline’s sweet spot and will have an impact on its quarterly performance.

Earnings Surprise History

The company has topped estimates in each of the last four quarters at an average rate of 10.3%. Not just that, the company hasn’t missed estimates in any quarter since 2012, which is a very big deal and is an indication that this quarter will be no different.

The Priceline Group Inc. Price and EPS Surprise

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Priceline has a Zacks Rank #3 and an Earnings ESP of +2.31% and that indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Summing Up

Priceline belongs to an attractive industry and has a strong international presence, which is a positive for the business. However, FX remains a concern.

The company has a solid history of positive surprises. Its positive earnings surprise and a favorable Zacks Rank #3 enhances the likelihood of a positive surprise this time around as well.

Other Stocks to Consider

Here are some stocks, which you may also want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

CACI International CACI with an Earnings ESP of +1.83% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Limited AVGO with an Earnings ESP of +2.57% and a Zacks Rank #2.

Luxoft Holding LXFT with an Earnings ESP of +5.17% and a Zacks Rank #1.

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