Priceline.com (PCLN) reported solid third-quarter results after the close Monday. We are maintaining our $584 per share fair value estimate.
The firm’s gross travel bookings increased an impressive 56.2% from the same period a year ago, while revenue jumped 45% led by international sales expansion (which increased almost 80% in the period). The company noted that its airline ticketing business experienced its strongest quarterly growth in the last seven quarters, with sales increasing 8%. Importantly, the firm was able to leverage this tremendous sales growth into an 83% increase in operating income, a very nice showing. Non-GAAP net income jumped almost 90% from the same period a year ago, and diluted earnings per share came in at $9.95, above consensus expectations of $9.30. Cash flow from operations exploded to over $1 billion through the first nine months of the year, up from under $600 million from the same period a year ago. That’s well in excess of net income, so we like the firm’s earnings quality.
Looking ahead, Priceline.com expects gross travel bookings to expand as much as 44% in its fourth quarter led again by international expansion (mainly Europe). Revenue is expected to jump as much as 32%, with non-GAAP net income as high as $5 per share. Both of these numbers were slightly lower than what the Street was expecting.