Trying to manage earnings expectations is an important job for many company executives. Booking Holdings (NASDAQ:BKNG) in particular has a reputation for issuing guidance that's a bit on the conservative side, initially scaring its shareholders but also setting a low bar for the online travel giant to try to overcome with its actual results three months later.

Coming into Wednesday's fourth-quarter financial report, Booking Holdings investors wanted to see solid growth in revenue and profit, and that's what they got. However, the company also gave guidance for the first quarter of 2019 that was weaker than most had expected, and that played a vital role in sending some shareholders into a panic. Let's look more closely at the numbers and how the future looks for Booking Holdings to see whether the market is overreacting to the online travel specialist's report.

Booking Holdings logo in black and blue.

Image source: Booking Holdings.

Solid numbers to finish 2018

Booking's headline fourth-quarter results were generally good. Revenue came in at $3.21 billion, growing 15% from year-earlier levels and almost exactly matching the consensus among those following the stock. Adjusted net income climbed at a healthier 25% rate to $1.05 billion, and that worked out to adjusted earnings of $22.49 per share, crushing the typical investor's forecast for $19.42 per share as well as its own guidance from the previous quarter.

Fundamentally, Booking Holdings' numbers looked a bit more mixed. Gross travel bookings came in at $19.6 billion, but that was up just 9% from year-earlier levels, showing slowing growth rates from recent quarters. Agency revenue was up 9% as well, with bookings growth of just 1.4%, but merchant revenue outpaced other parts of the business in boosting its top line by 38% on a 46% rise in bookings. Advertising and other revenue sources saw growth of about 14%.

Unit metrics were weak in certain areas. Room-night counts were higher by 13% to 171 million, finishing a year in which the year-over-year growth stayed within a 12% to 14% range in all four quarters. That growth rate compared favorably to previous guidance for a 9% to 12% rise in the fourth quarter. However, rental-car days were down 0.6% to about 15 million, and airline ticket sales were also down for the first time in more than a year, falling 1.3% over the past 12 months.

Nevertheless, CEO Glenn Fogel focused on full-year accomplishments. "2018 was a good year for Booking Holdings," Fogel said, "as we met many important financial and strategic goals. The CEO highlighted reaching three-quarters of a billion room-nights and solid growth in financial metrics as key milestones of the online travel giant's success.

Why are investors afraid of Booking Holdings' 2019?

Booking also stayed optimistic about the coming year. In Fogel's words, "I am excited about the investments we are making in 2019 as we position the company for long-term growth."

That optimism made Booking Holdings' guidance look a bit inconsistent. The company believes that hotel room-nights booked will climb just 6% to 8% in the first quarter of 2019, with gross travel bookings seeing extensive currency headwinds that will limit reported bookings results as well adjusted revenue growth to a range of -1% to +1%. Adjusted net income of $495 million to $510 million would translate to earnings of just $10.90 to $11.20 per share on an adjusted basis, far below the current consensus forecast among investors for $12.78 per share.

Booking Holdings shareholders weren't pleased with the report, and the stock fell 9% in after-hours trading following the announcement. Yet the big question is whether in hindsight, the company's downbeat projections will once again prove to have been too fearful. Time after time, many traders have sold their shares based on warnings like this, only to see the actual results come in better than expected. Moreover, adjusted earnings guidance for the full 2019 year in the low double-digit percentages is entirely consistent with what most investors are looking to see. Even so, signs of slowing growth have appeared in Booking's numbers for some time -- and it's possible that 2019 could be the year in which the impressive growth that the company has managed to post historically will come to an end.

Check out the latest Booking Holdings earnings call transcript.

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