The Priceline Group (PCLN) is set to report its FQ2 '15 results tomorrow morning before the opening bell. The Estimize consensus is set at an EPS figure of $12.42 and a revenue target of $2.303B, proportionality higher than company guidance and Wall Streets expectations. Wall Steet is predicting an EPS number $11.90 and a revenue figure of $2.275B, similar to Estimize, Wall Street expects the report to yield slightly better numbers than company guidance.
Much like its competitors such as Expedia (EXPE), Priceline's earnings are likely to be effected by the surging u.s. Dollar. As purchasing power diminishes for international travelers entering into the United States, the quantity of incomers is expected to fall resulting in a fall in revenues. The United States travel market is seen as a very lucrative market for online travel providers and therefore investors will be eager to hear management's strategy for Priceline's US business in a higher US Dollar environment.6
Investors will also be interested in gaining more information with respect to management's decision to invest circa $250M in a Chinese Travel Portal called Ctrip.com International. Priceline engaged in the buying of convertible bonds and if triggered, would give Priceline more than a 10% stake in the firm. This initiative by management is likely to pay dividends in the future as the strategy attempts to further diversify Priceline's revenue streams and increase its exposure to a rising U.S. Dollar. Priceline has made it clear to the market that they have every intention of making the most out of emerging economies in the future. With a rising consumer class in Asia and in particular China, Priceline stands to benefit from increasing demand as more and more individuals in those regions begin to travel internationally.
The report for Priceline will be crucial tomorrow morning. With the stock trading sideways since the company's FQ1 '15 release, the market is looking for a catalyst to send the stock in either direction. Given management's track record of overachieving guidance and expectations, the market is likely to be expecting a beat tomorrow morning. The big question for investors is whether or not management can deliver on its global strategy or not? Competitors to date have struggled in their expansions and some nervousness around Priceline's ability to buck the trend still exists. In reality, if Priceline can in fact continue to successfully expand its operations and offering into growing international markets, the long term outlook for Priceline looks strong. Investors are encouraged to take a long term view when deciding whether or not Priceline is a good investment and should focus on the fundamentals of the company and also the travel industry as a whole.
