How Might Booking Stock React To Upcoming Earnings?

Booking (NASDAQ:BKNG) has $170 Bil in current market capitalization. Revenue over the last twelve months was $23 Bil, and the company was operationally profitable with $6.4 Bil in operating profits and net income of $5.0 Bil. Booking is set to report its earnings on Feb 20th, 2025 after market close. While the post-earnings stock reaction will depend on how the results and outlook stack up against investor expectations, a detailed look at historical results can aid you if you are an event-driven trader. Here is how – either understand the historical odds and position yourself prior to the earnings announcement, or look at the correlation between immediate return and medium-term return post earnings and take a trade one-day after the announcement.

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Booking’s Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post earnings returns:

• In the past 5 years, 20 earnings data points recorded, with 10 positive and 10 negative one-day (1D) returns observed. In summary, positive 1D returns seen about 50% of the times.
• The percentage has remained the same at 50% if we consider last 3 year data instead of 5.
• Median of the 10 positive returns = 3.6%, and median of the 10 negative returns =-3.8%

Additional data for observed returns 5-days (5D), and 30-days (30D) post earnings are summarized along with the statistics, in the table below.

Correlation Between 1D, 5D, and 30D Historical Returns

A relatively less risky strategy (though not useful if correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has highest correlation and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 4 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to correlation between 1D post-earnings returns and subsequent 5D returns.

Is There Any Correlation With Peer Earnings?

Sometimes, peer performance can have influence on post-earnings stock-reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on past post-earnings performance of Booking stock compared with stock performance of peers that reported earnings just prior to Booking. For fair comparison, peer stock returns also represent post-earnings one day (1D) return.

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