Priceline.com - Aggressive Growth Stock: Rated Strong Buy

Priceline.com (PCLN - Analyst Report) is close to reporting earnings and could continue its streak of positive earnings surprises. The stock is a Zacks #1 Rank (Strong Buy).

Company Description

Priceline.com operates as an online travel company. The company provides price-disclosed hotel reservation services on a worldwide basis with approximately 185,000 hotels in 160 countries primarily under the Booking.com, priceline.com, and Agoda brand names. It also provides price-disclosed rental car reservation services in approximately 4,000 locations worldwide through rentalcars.com . It offers retail airline tickets, hotel room reservation, and rental car services through its Name Your Own Price demand- collection system, as well as vacation packages consisting of airfare, hotel, and rental car components. Priceline was founded in 1997 and is headquartered in Norwalk, Connecticut.

Priceline.com Beats in Six Straight Quarters

Priceline.com has topped the Zacks Consensus Estimate in each of the last six quarters. Over the course of those six quarters, the company has topped the Zacks Consensus Estimate by an average of $0.38 or 8.7%. As a result of these beats, the stock has risen on average by $21 or 4.5% following the earnings releases.

In the September 2011 quarter, the stock rose 7.7% following a 8% beat of the bottom line. The company reported earnings of $9.75, $0.73 better than the Zacks Consensus Estimate and were 96% higher than year ago levels. Revenues of $1.45 billion were $40 million ahead of the Zacks Consensus Estimate and showed an increase of 45% from the year ago period.

Priceline.com Most Recent Reported Earnings

On February 27, 2012 Priceline.com reported revenue of $991 million, roughly $20 million ahead of the Zacks Consensus Estimate and up from $731 million reported in year ago quarter. In addition, earnings per share came in at $4.91, $0.12 higher than the Zacks Consensus Estimate of $4.79. The beat of 2.5% was the smallest of the last six quarters and the stock moved higher by 7.2% following the release.

Priceline.com Expected to Report Earnings

Priceline is expected to report earnings on May 9, 2012. The Zacks Consensus Estimate is calling for revenue of $1.038 billion and EPS of $3.63. The year ago period saw revenue of $809 million and EPS of $2.40. Following the release last year, the stock moved lower by 3.4%.

Priceline.com is Focused on Hotel Growth

Over the last several years, Priceline.com has seen the growth of the company coming from one major source, hotel room nights. The chart below shows how Priceline.com has been able to increase hotel room nights sold dramatically. It should be noted that there is a season drop in sales from the third quarter to the fourth quarter in a calendar year, but that substantial growth is seen in the first quarter of the year versus the fourth quarter of the prior year.

Valuation

The valuation picture for Priceline.com is higher than the industry average, but that is to be expected given the consistency of positive earnings surprises. The trailing twelve months PE of 33x is higher than the 24x industry average, as is the 25x forward PE compared to the 19x industry average. The price to book is probably keeping value investors at bay with a 14x multiple compared to a 3.3x industry average.

The Chart

The price and consensus chart for Priceline.com is among the best out there. We see a history of increasing earnings estimates and solid gaps between the lines which indicate earnings growth. The stock has paced the earnings estimates quite well, suggesting that investors continue to believe that there will be higher earnings in the future. Priceline.com is a Zacks #1 Rank (Strong Buy).

By: Brian Bolan

May 03, 2012 | Comment(s): 0

Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at on twitter at @BBolan1