Booking Beats Earnings Estimates but Stock Falls on Softer Outlook

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Booking Holdings

posted better-than-expected financial results, but the online travel agency’s shares fell after the company provided a cautious outlook for the September quarter.

The second-quarter results provided vivid illustration of the sharp recovery in the travel industry from the deep declines suffered in earlier stages of the Covid-19 pandemic. For the quarter, Booking (ticker: BKNG) posted revenue of $4.3 billion, up 99% from a year ago, matching Wall Street estimates. Gross travel bookings were $34.5 billion, up 57%. Room nights booked rose 56%.

Booking shares, after initially trading sharply higher after hours on Wednesday, reversed course after the company’s conference call. They were down 2.8% to $1,911.68 in premarket trading Thursday.

Non-GAAP earnings were $19.08 a share, ahead of the Wall Street consensus at $17.56. Non-GAAP net income was $776 million, vs. a loss of $105 million in the year-ago quarter. Adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, was $1.1 billion, up from $48 million in the year-earlier period. Under generally accepted accounting principles, the company earned $857 million, or $21.07 a share, compared with a year-ago quarter loss of $167 million.

CEO Glenn Fogel said in a statement that Booking “reached another milestone” in recovering from the pandemic, as second-quarter room nights booked surpassed 2019 levels for the first time. I have noted that gross bookings were up 38% from the 2019 second quarter, or 48% adjusting for currency.

“Looking forward, we expect record Q3 revenue and are very busy working with our customers and partners to help enable an extremely busy summer travel season,” he said.

But on the company’s earnings conference call, Fogel noted that the pace of bookings growth has moderated since the end of the quarter, with just more than 20% growth in gross bookings, or 35% on a constant currency basis. Booking Chief Financial Officer David Goulden added that the company expects gross bookings to be pressured by about 12 percentage points in the third quarter. He added that the company expects third-quarter adjusted Ebitda to be “slightly” above the third-quarter 2019 level, but 15 percentages points higher on a currency adjusted basis.

I have added that gross bookings for the fourth quarter are more than 15% higher than at the same point in 2019, but with a higher percentage of cancelable bookings. Goulden added that Booking continues to expect full-year 2022 Ebitda margin to be up a few points from 2021.

Fogel was asked on the call to explain the forecast for slowing bookings growth. “We know there are countries around the world that are still somewhat inhibiting travel, making it more difficult,” he said. “And we know we hear about people saying how hard it’s been in some airports. We read about some of the travelers with cancellations and the crowds and you have to come five hours before on the airport, all these things. So why the deceleration? Hard to say and we can all hypothesize about what that is and why and all that. But I do believe there is tremendous opportunity still in this recovery.”

In an interview with Barron’s, Fogel added that while there will continue to be up and downs in travel trends, he said that “what I do know is that in the long run people travel more and more and more.” He added there was no sign in the bookings data that suggests people are trading down in “star level” or length of stay, and he adds that there have been some signs of “revenge travel,” people spending lavishly on travel to make up for the long period staying at home.

Asked about whether the company would consider a stock split, given recent splits of high priced shares by

Alphabet
,

amazon.com
,

Tesla

and others, he said that the Booking board “will continue to evaluate it,” adding that there are “pros and cons,” and that “nothing is ever off the table.”

Write to Eric J. Savitz at eric.savitz@barrons.com