Priceline soared 10% in early action Thursday after the company offered strong guidance for its second quarter. Meanwhile, Sabre posted results that investors took as less promising. The news comes as shares in the once-hot online travel sector struggle to right themselves.
Sabre, owner of the Travelocity Web site, reported net income of $17 million, or 13 cents per share, compared with $58 million, or 44 cents, a year earlier. Results were hurt by the expensing of stock options. On an adjusted basis, earnings were 24 cents. Sales jumped 20% to $700 million. Results surpassed analysts' estimates of earnings of 23 cents and sales of $686 million, according to Thomson Financial.
"We had a strong start to the year, with first-quarter earnings at the high end of our projections and revenue growth of 20% year over year," said Sam Gilliland, Sabre Holdings' chairman and CEO. "Across our portfolio, we have made significant progress toward this year's operational objectives, including deepening our relationships with major airlines, hoteliers and marketing partners. We are optimistic about our growth prospects this year and beyond."
The earnings were helped by a 59% surge in revenue at Travelocity, the company's largest business. The company forecasted earnings in the second quarter of 38 cents to 43 cents, below the 53 cents analysts had expected. Earnings for the year will be between $1.70 and $1.77, in-line with Wall Street projections of $1.71. Its shares slumped 12 cents to $22.68.
Travelers are increasingly looking to the Web sites of hotels and airlines to find the best deals at the expense of the online travel agencies. This is leading to greater price competition and is forcing consumers to wade through a confusing array of promises by Web sites offering them the lowest prices, making Wall Street pessimistic about online travel companies.
The exception is Priceline, which analysts say is well-positioned to benefit from the surging online travel demand in Europe.
rose $2.65, or 10%, to $27.95 after the online travel company said second-quarter and full-year earnings would exceed analysts' forecasts.
The company forecasted second-quarter earnings of 48 cents to 53 cents, ahead of the 47-cent mean estimate of analysts surveyed by Thomson Financial. For the full year, the company raised its guidance to $1.60 to $1.70 a share from a prior outlook of $1.50 to $1.65. Analysts project earnings of $1.58 a share for 2006.
"Going forward, we believe (and management suggested on its conference call) that 2006 guidance is conservative," writes Scott Devitt, an analyst with Stifel Nicolaus, in a note to clients today. "In fact, in the month of April Priceline's hotel revenue and gross profit grew by 50% from March levels. We are uncertain how long triple digit annualized growth in Europe can last but believe Priceline is well-positioned to maintain its competitive position given its low take rate relative to competitors." He rates Priceline stock buy.
, the largest travel Web site, are due May 11. The company is expected to earn 22 cents on sales of $543.08 million. Expedia shares jumped 25 cents to $18.70.