Travel business has been seeing major fluctuations for quite a while now. The associated businesses have been working on the edge, and the changes keep affecting the results. But recent growth has brought change. Priceline reported that it has achieved better-than-expected quarterly results on Wednesday. This was due to the sudden growth and a recent rise in hotel and car rental reservations. This helped in offsetting the drag of a stronger dollar. The shares of Priceline saw a hike of 15 percent that helped it reach to $1,238 in pre-market trading.
Priceline performs beyond expectations
Priceline is solely focused on travel and is one of the most efficient online travel booking site. It runs many service-based products including Booking.com, Kayak.com and Priceline.com. The company saw a major level of growth in the recent quarter with a steep increase in net income. As per the reports, the net income of Priceline in the fourth quarter rose to $504 million, or $10 per share. This is good growth when compared to $452 million or $8.56 per share in the previous year. After making adjustments for certain items, the calculations showed a net income of $12.63 per share. This was almost a dollar more than the Wall Street estimates of $11.80 per share. Priceline also beat the analysts’ estimates with this surge of growth. The revenue increased by nine percent to $2 billion which is 0.4 billion more than the analyst estimates of $1.96 billion.
Priceline’s growth is more of an interesting case study, as it makes most of its money from international operations. This policy has been a double-edged sword, given the value of the dollar being strong. As international travel bookings surged 29 percent during the quarter, when calculated in home currency, a sustainable growth in the dollar was anticipated. So when the results were translated back into U.S. dollars, there was still a smooth growth of 16 percent. Though the growth was less, it has been more of a substantial one, as it helped in offsetting an 8 percent decline in U.S. travel bookings. If we look at the overall growth, it has been a substantial one, too, as the company saw that the travel bookings grew by 13 percent to $12 billion in the quarter, driven by double-digit growth in hotel and car rental reservations. If we look on a constant currency basis, we will find that the bookings would’ve increased by a hefty 24 percent.
Lower gas prices, stronger dollar are the key reasons
This growth line shall definitely stay. Priceline expects solid travel bookings growth to continue in further ties. The chief financial officer Daniel Finnegan, on a call with investors and analysts, said that the macro travel environment appears healthy for the company. He also pointed out that lower gas prices have led to cheaper airline tickets and more discretionary spending, and this is encouraging the travel prospects on the industry. As far as the current quarter is concerned, Priceline is forecasting adjusted earnings between $9.00 and $9.60 per share. Wall Street, on the other hand, is expecting $9.61 per share. Amidst all this, however, shares of Priceline have fallen by 12 percent in the last three months.