In MoneyShow's Top Picks 2018 report published at the start of the year, money manager Ingrid Hendershot chose Booking Holdings (BKNG) as her favorite speculative stock for the year. Now up 19%, the editor of Hendershot Investments updates her outlook.
Booking Holdings (BKNG), formerly Priceline, reported first quarter revenues rose 21% to $2.9 billion while booking a 33% increase in net income to $607 million with EPS soaring 35% higher to $12.34.
These strong results reflected the second consecutive quarter of operating margin expansion thanks to the company's performance marketing optimization efforts. The company has 5.2 million listings and expects that to grow as they add more single-house rentals to their listing base and continue their geographic expansion.
Gross travel bookings increased 21% during the quarter, or 12% on a constant currency basis, to $25 billion. Room nights booked increased 13.2% to 196.8 million with rental car days booked rising slightly to 18.7 million and airline tickets booked increasing 1.9% to 1.8 million.
Free cash flow jumped 64% during the quarter to $508 million. During the quarter, the company repurchased $719 million of its stock and ended the quarter with more than $16 billion of cash and investments and $8 billion of long-term debt on its balance sheet. The company has $10 billion remaining authorized for future share repurchases which they expect to complete in the next two to three years.
Management's outlook for the second quarter is for total gross travel bookings growth of 10%-14% with room nights booked growing 7%-11%. This should lead to revenue growth in the second quarter of 11.5%-15.5% with EPS expected in the range of $15.50-$16.15, reflecting 10% growth at the midpoint.
Booking Holding's stock still appears reasonably valued for long-term investors seeking to book a reservation into a high-quality business with strong revenue, earnings and cash flow growth.
