Will Priceline Fend Off Its Rising Rivals?

Source: Priceline.com.

The online travel space has been an extremely lucrative niche over the years, as a steadily improving U.S. economy and the longer-term rise of the middle class in a number of emerging-market countries around the world have added up to greater numbers of travelers seeking help and services. Priceline Group (BKNG -0.40%) identified the international trend in travel early on, and it has built up an impressive infrastructure that connects people to those who can serve their travel needs across the globe. Yet with recent moves from rivals Expedia (EXPE -0.33%) and TripAdvisor (TRIP -0.59%) pointing to the cutthroat competitive nature of the industry right now, and coming into Priceline's fourth-quarter report on Thursday morning, investors will want to know how Priceline will respond to those moves. Let's take an early look at what's been up with Priceline lately and whether investors can expect a rebound in the stock after its earnings report.

Stats on Priceline Group

Source: Yahoo! Finance.

How will Priceline Group earnings fare?
Investors have gotten less optimistic about Priceline Group earnings in recent months, reducing their fourth-quarter estimates by a nickel per share and their full-year 2015 projections by more than $2.40 per share. The stock has reflected those worries, falling 6% since mid-November.

Priceline's share-price woes started after its third-quarter results sparked a sell-off. Priceline's growth was still solid, with earnings per share and gross travel bookings both climbing at a 28% pace, and strength in the accommodation and rental-car businesses both added to the company's gains. But investors were nervous about Priceline's guidance for the fourth quarter, leading to extensive downward revisions in consensus estimates for Priceline's earnings.

Source: Priceline.com.

Some of the problems that Priceline faces stem from the strength of the U.S. dollar. Given its international scope, Priceline has global currency exposure, and in particular, the weakness of the euro has made its revenue and profits from the eurozone translate into fewer dollars on its financial statements. With few signs of currency trends reversing themselves, Priceline could see further pressure on the foreign-exchange front in this quarter's results.

Yet the bigger question is a strategic one of how Priceline will respond to the growth in Expedia, TripAdvisor, and other competitors. Expedia's announced buyout of Orbitz Worldwide (NYSE: OWW) only accelerates the pace of consolidation in the industry, following Priceline's own buyout of Kayak and OpenTable, and TripAdvisor has also made some key buys of restaurant and tour-related companies in order to beef up its own presence in the industry. As the giant in the space, Priceline has a number of options that involve further massive acquisitions of its own, and investors will want to hear what the company has to say on the M&A front.

Source: Priceline.

Another area that has become more important is the mobile realm, where companies are fighting to offer deals to mobile users. Priceline's Booking.com unit released its Booking Now mobile app in January in an attempt to push back against a new offering from privately held, venture-capital-funded Hotel Tonight. With more travelers needing to book accommodations, flights, and other travel-related needs on the fly rather than pre-planning trips on a desktop at home, Priceline will need to stay on the cutting edge of technology to keep its users satisfied.

In the Priceline Group earnings report, be sure to remember that some saw the company's fourth-quarter guidance three months ago as having been unnecessarily pessimistic. That could limit gains from a potential earnings beat, but it should also temper any negative reaction to modest guidance for the first quarter and for the full 2015 year. Priceline will have to deal with greater competitive pressures, but with a track record of successfully fending off Expedia and others in the past, investors should remain confident about Priceline's future prospects.