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PCLN earnings after the close

15:27 PCLN Earnings Preview (510.99 -2.38)

Online travel website Priceline (PCLN) is set to post Q3 earnings after the close with a conference call to follow at 4:30pm ET. Current Capital IQ consensus stands at EPS of $9.29 on revenues of $1.416 bln. Shares of PCLN are attempting to recover from a massive sell off at the end of September that saw shares tumble from $540 all the way to $440. The selling began with a market-wide well off on European debt concerns. PCLN was one of the harder hit names as it 1) has European exposure; 2) Failed to break above the $540 resistance in the weeks prior to the selling and 3) broke below its 200 dma (at the time $487) that exasperated the selling. Now the stock heads into the Q3 report back at the $515 level with the 200 ($496) sitting below as potential support. But the co’s European exposure (U.K. approx 14% of revenues) and International growth remain key worries for investors and $520 remains a key level of resistance.

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In Q2, PCLN reported 2Q11 revs of $1.1 bln, up 44% y/y and above the high end of guidance, topping consensus of $1.08 bln, driven by 70% bookings growth, including 98% y/y growth in international. Proforma EBITDA rose 71% to $349 mln despite a challenging comparison as higher operating expenses were more than offset by stronger gross margins. Proforma EPS was $5.49, topping the high end of guidance and consensus of $4.91. Total gross bookings were $5.8 bln. Domestic gross bookings improved by 13% y/y, a slight sequential moderation from the 14% growth in 2Q10, benefiting from strong merchant retail hotel and opaque air ticket growth. Co issued upside guidance for Q3, as it saw EPS of $9.10-9.30 vs. $7.95 Capital IQ Consensus Estimate; for revenue it expected to see a year-over-year increase in Q3 of approximately 37% to 42%, vs. +37.9% consensus. PCLN expected International bookings to grow in the range of 62-67% y/y compared to 8-13% for domestic.

Revenue growth in Q3 is projected to come in at approx 40% which would be down from Q2’s 43.7% but still mark the second highest y/y growth quarter over the past two years. Impressive for a co that has reached the size of PCLN. Even more impressive has been the Gross Profit growth which hit 68% in Q2 as the co continues to benefit from a well diversified inventory stream and product mix. The key of course will be if the International business can continue given the global economic uncertainty. As noted above the co projected growth in the range of 62-67% compared to just 8-13% domestically. That exposure is one of the primary reasons why the stock was hit so hard in late September. This report will help provide some insight into the co’s performance and the environment it is operating in.


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