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Priceline Shares Fall After First-Quarter Report

The company tops profit estimates, but sales come up short.
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Updated from 4:55 p.m. EDT

Priceline.com

(PCLN)

shares were falling in extended trading Monday after the company said first-quarter profits declined because of expenses related to two acquisitions it made last year.

The online travel company beat Wall Street's estimates for adjusted earnings, but revenue fell short of analysts' expectations.

Priceline said net income fell to $4.1 million, or 10 cents a share, from $4.3 million, or 11 cents a share, a year earlier. Net income included special items, notably noncash amortization expenses from the purchases of Active Hotels and Travelweb.

Excluding those items, adjusted earnings came to 21 cents a share, a penny better than the 20 cent-a-share average analyst estimate from Thomson First Call.

Investors appeared to have expected more, though, and shares fell $1.49, or 6%, to $25.15 in after-hours trading following the earnings release. The stock finished regular trading up 84 cents at $26.64.

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Revenue totaled $233.4 million, up 4.1% from $224.1 million a year before, but short of the $240.3 million analyst consensus. Gross travel bookings surged 40.8% to $507 million.

"With $507 million in gross travel bookings in the first quarter, Priceline.com's bookings have more than doubled over the last two years," said CEO Jeffery Boyd. "We believe our strong long-term performance has been due in large part to the introduction of new services and markets, and the online and offline marketing that we are putting behind our well-known brand."

Airline ticket bookings rose 20.2% year over year, while hotel room night bookings grew 52.5%, and rental car unit bookings increased 5.3%.

Priceline achieved notoriety during the dot-com boom for its "Name Your Own Price" method of purchasing travel. Consumers submitted bids for travel services, but were required to make purchases if Priceline accepted their bids. Bidders weren't allowed to choose their airline or hotel under this so-called opaque system.

In order to appeal to a broader audience, Priceline has been adding "retail" travel offerings to its Web site, allowing consumers to view and compare specific flights or reservations before buying. In the first quarter, the company launched its retail hotel service, completing the expansion.

During a conference call, Priceline executives acknowledged the company's opaque airline business continues to shrink because of the tough pricing environment in the airline industry. But they voiced optimism that recent fare increases by major carriers could improve that particular business.

Looking ahead, the company offered second-quarter adjusted EPS guidance of 34 cents to 40 cents, compared with the 37-cent analyst consensus. Priceline is not providing specific EPS guidance for the third and fourth quarters. But executives said in a conference call they're comfortable with the $1.20 full-year adjusted EPS consensus from Thomson First Call.

The company's guidance excludes the anticipated dilutive impact from last December's accounting rule change requiring companies to include contingently convertible debt when they calculate shares outstanding.