Priceline.com (NASDAQ:PCLN) spokesmen William Shatner and Leonard Nimoy are famed for their Star Trek roles, so it's probably fitting that the company had a "Scotty moment" a few years back. You know how it goes: "I can't hold her together, cap'n! She's breaking apart!" Back then, the company had to resort to a reverse stock split to save face, and its original "online rejection service" business model was starting to sputter. But the new and improved Priceline is doing a lot better now.
Last night, the Motley Fool Stock Advisor selection's stock shot up 15% in after-hours trading after the company posted a 68% spurt in third-quarter profits and hiked its guidance for the rest of the year. Analysts were only banking on a 32% bottom-line improvement.
Despite a mere 10% uptick in revenues, Priceline's snappy bottom line materialized thanks to its strong published-price travel business. Yes, that's right, published prices. Priceline may have started out by letting folks bid their desired price for lodging, airfare, and car rentals, but the novelty wore thin. The company's commitment to transparency, even if it has meant transforming itself into a more cookie-cutter portal like Expedia (NASDAQ:EXPE), Cendant's (NYSE:CD) Orbitz, or Sabre's (NYSE:TSG) Travelocity, has paid off.
Sure, it was intriguing to see whether a rock-bottom bid would land you a dreamy night's stay at a posh resort. But there was a time when Priceline was accepting just one of every six submitted bids. That was no way to run a business. Imagine if Wal-Mart (NYSE:WMT) told five customers to take a hike for every one that it ultimately rang up.
There's still a place for transmitting great travel deals via the Internet -- just check Travelzoo (NASDAQ:TZOO) and its popular "Travelzoo 20" weekly list, for example. However, travel is serious business, even if it's a pleasure trip. Nobody likes to hand over their credit card information with a blindfold on. If you're planning that weekend getaway to Vegas, or need to get to Memphis for an Elvis lookalike convention, you want to deal with tangible details. The new Priceline gives prospective travel bookers all the info they want, and the strategy is clearly working.
Priceline now expects to earn pro forma profits between $1.33 and $1.37 per share. Analysts were holding out for a $1.26 a share showing. Priceline seems to have learned an important lesson from good old Mr. Scott: It's easy to look like a miracle worker if you deliver even more than you promised.
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Longtime Fool contributor Rick Munarriz has used just about every online travel service and publisher to book his treks over the years, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
