Priceline posts profits, sees Q4 rev above Street
By Reshma Kapadia
NEW YORK, Nov 1 (Reuters) - Internet travel retailer Priceline.com Inc. <PCLN.O> on Thursday reported a third-quarter profit before items and said fourth-quarter revenues would top Wall Street's average estimate as demand for travel has begun to rebound after the Sept. 11 attacks.
The attacks on the United States sent the airline and travel industries into a tailspin, as airlines canceled flights and many travelers chose to stay home. Priceline, whose shares have traded down on the drop in worldwide travel, generates much of its business from selling discounted airline tickets.
Including one-time items, Priceline reported a third-quarter net loss of $3.6 million, or 2 cents a share, compared with a loss of $199 million, or $1.19 a share, a year-earlier.
Chief Executive and Chairman Richard Braddock said conditions were still uncertain but demand for Priceline's sale of hotel reservations have come back entirely and airfare sales have come back about 90 percent.
But Braddock indicated that Priceline may be willing to somewhat pare margins to win sales.
"We are basically sensitive to margin strength," Braddock said. "We are willing to trade margins for volume, but by and large we are looking to retain our margin structure."
In the third quarter, the company said it earned $6.3 million on a pro forma basis before one-time items, or 3 cents a share, compared with a loss of $2.2 million, or a penny a share, a year-earlier, largely on cost controls.
Revenue for Priceline.com, in which two firms controlled by Hong Kong tycoon Li Ka-Shing own a combined 27 percent stake, fell to $302 million from $341 million a year-earlier, but was ahead of its guidance of $280 million to $300 million, boosted by strong growth in its hotel business.
Wall Street analysts, on average, had expected Priceline to post earnings of a penny a share on revenues of $290 million, according to Thomson Financial/First Call. Analysts had revised their estimates after the attacks.
It added 927,000 new customers, bringing its total customer base to 11.8 million.
Executives said its hotel business comprised a larger part of its overall mix at about 30 percent of booked offers, up from 22 percent last quarter.
"Numbers such as this demonstrate the strength of non-air revenues and lessen our dependence on our airline service," said Bob Mylod, chief financial officer, in a conference call.
Priceline had made strides by stepping into the black after embarking on a major restructuring and focusing on its core business last year in the wake of customer service issues and expanding into areas such as groceries.
OUTLOOK
Priceline said it expects to post fourth quarter revenues of $215 million to $235 million, down sharply from the previous quarter but ahead of consensus Wall Street estimates of $180 million, according to First Call.
"Guidance was a little bit better than what I was expecting," said Thomas Underwood, analyst at Legg Mason, on the fourth quarter revenue outlook. "The hotel business was extremely strong."
Priceline hoped to hit pro forma break-even on a per share basis in the fourth quarter but warned results could range a penny or two on either side, leaving it some wiggle room depending on what happens in the industry and economy.
In an interview, Braddock said the airlines' fare sales continued to cast a the pall over the industry, but he said the so-called "fire" sales was unlikely to continue.
"They are in a totally untenable position financially and they need very quickly to get more revenue out of clients," Braddock said. "They are going to have to dramatically raise prices."
Braddock said he aims to make sure Priceline as nimble as possible to take advantage of any circumstances in the industry -- including potential bankruptcies at some airlines.
"I think the underlying tone is that they anticipate the consumer retail (airfare) promotions to abate. They could have some great tail wind if the hotel business stays as strong as it has been and retail pricing picks up," said Anthony Noto, analyst at Goldman Sachs about the guidance.
Shares of Priceline closed at $4.40 and were up in after-market trading at $4.80. The company's shares have tried to regain some of the lost ground forged after the Sept. 11 attacks and since bottoming on Sept. 19 at $2.03.
18:52 11-01-01 |
