With The Stock Up 5% This Year, Will Q2 Results Drive Booking Stock Higher?

Booking Holdings (NASDAQ: BKNG), the world’s largest online travel agency, that offers services from lodging to airline tickets to car rentals, is scheduled to announce its fiscal second-quarter results on Thursday, August 1. We expect the company’s stock to likely see little to no movement with revenues and earnings matching market expectations. The company’s stock is up 5% so far ytd to $3721. In comparison, BKNG’s peer Expedia (NASDAQ: EXPE) stock fell 15% year-to-date to $129. Booking saw better-than-expected numbers across every operational metric, as well as revenues and profitability in Q1. The company’s results were driven by a larger booking window, resiliency in Europe, and less of a negative impact from the war in the Middle East. There is optimism among consumers due to the low unemployment rate and the anticipated fed rate cuts, but there are concerns due to layoffs at major companies.

For the second quarter, BKNG management expects room night growth of 4%-6%, negatively impacted by Israel and no booking window benefit. Notably, April was above 6%. Gross bookings are expected to be between 3%-5%, and revenue growth should be 4%-6%. It also expects Q2 EBITDA to be in the range of $1.7-$1.75 billion, down 7 basis points from last year due to a change in Easter timing. In addition, the company expects to see its fixed costs grow at a slower pace than its revenues through 2025 and beyond, since they are currently going through an AI-related investment cycle.

BKNG stock has seen extremely strong gains of 70% from levels of $2215 in early January 2021 to around $3721 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. However, the increase in BKNG stock has been far from consistent. Returns for the stock were 8% in 2021, -16% in 2022, and 76% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BKNG underperformed the S&P in 2021.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BKNG face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

(1) Revenues expected to come in line with the consensus estimates

Trefis estimates Booking Holdings’ Q2 2024 revenues to be around $5.8 Bil, matching the consensus estimate. In Q1 2024, the online travel agency’s revenues grew 17% year-over-year (y-o-y) to $4.4 billion, driven by a 10% y-o-y increase in gross bookings to $43.5 billion. Gross travel bookings refer to the total dollar value, generally inclusive of taxes and fees, of all travel services booked by the customers, net of cancellations. Room nights booked increased 8% in Q1 from the prior-year quarter, rental car days were up 11% y-o-y, and airline tickets booked jumped 33% y-o-y in Q1. For the full-year 2024, we expect Booking Holdings revenues to grow 9% y-o-y to $23.3 billion.

(2) EPS likely to match the consensus estimates  

Booking Holdings’ Q2 2024 earnings per share (EPS) is expected to come in at $38.21 as per Trefis analysis, in line with the consensus estimate. The company’s operating profit was $791 million, up 75%  y-o-y, reflecting a 600 bps operating margin improvement in Q1. This was driven by much more efficient marketing, as well as operational leverage on personnel and G&A, offset by higher sales and R&D. This resulted in EPS of $22.40, almost triple compared to the same quarter last year.

(3) Stock price estimate in line with the current market price

Going by our Booking Holdings’ Valuation, with an earnings per share estimate of around $176.45 and a P/E multiple of 22.1x in fiscal 2024, this translates into a price of $3900, which is in line with the current market price.

It is helpful to see how its peers stack up. BKNG Peers shows how Booking Holdings stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 7/31/2024
[2] Cumulative total returns since the end of 2016