Why Booking Holdings Is Losing Altitude Today

Shares drop after the airfare search company reports fourth-quarter results. Do the results justify the fall?

Brian Feroldi
Brian Feroldi
Feb 28, 2019 at 1:03PM
Technology and Telecom

What happened

Following the release of fourth-quarter earnings, shares of travel giant Booking Holdings (NASDAQ:BKNG) dropped as much as 10% in early morning trading on Thursday. The stock was down about 9% as of 12:23 p.m. EST.

So what

Here's a review of the headline numbers from the company's fourth quarter:

  • Revenue jumped 15% to $3.21 billion. That matched the number that analysts were expecting.
  • Adjusted net income grew 25% to $1.05 billion.
  • Adjusted earnings grew 33% to $22.49 per share. That comfortably exceeded the company's own guidance and also surpassed the $19.42 EPS analysts were expecting.

Zooming out to the full-year 2018 results, here's a review of the key numbers:

  • Revenue grew 17% to $14.5 billion. This figure matched Wall Street's estimate.
  • Non-GAAP net income increased 16% to $4.4 billion.
  • Non-GAAP EPS expanded 20% to $92.59. This number came in ahead of the $89.70 that market-watchers were expecting.
Woman and girl standing next to luggage.

Image source: Getty Images.

Booking Holdings' CEO Glenn Fogel was modest in his commentary on the year:

2018 was a good year for Booking Holdings as we met many important financial and strategic goals. In 2018, we achieved a new milestone exceeding three-quarters of a billion total booked room nights and produced strong year-over-year growth across our key financial metrics.

So if the company finished 2018 strong, why are shares falling? The blame can be placed solely on the shoulders of the company's guidance:

  • First-quarter 2019 adjusted revenue growth is expected to be in the range of negative 1% to 1%. Wall Street was expecting growth of 8%.
  • First-quarter 2019 adjusted net income is expected to land between $495 million and $510 million, or $10.90 to $11.20 per share. That number is well below the current consensus estimate of $12.78.
  • Full-year 2019 non-GAAP EPS is expected to grow "in the low double digits" on a currency-neutral basis.

Given the sluggish forecast, it's understandable why shares are selling off today.

Check out the latest Booking Holdings earnings call transcript.

Now what

Booking Holdings' guidance certainly looks disappointing on the surface. However, it's worth noting that gross travel bookings are expected to grow between 5% and 7% when viewed through a constant currency lens. That suggests that this company's core brands remain as popular as ever.

What's more, Booking's management team has a long history of being very conservative with its guidance. That's why this happy shareholder is going to take these guidance numbers with a big grain of sugar.