Booking Sees Q4 Growth Stall as Travel Cools: Rapid Earnings Reaction
Key Points
Booking's adjusted revenue rose 9%, while a $900 million legal charge pushed GAAP revenue lower.
Buybacks helped earnings per share grow much faster than net income.
Management expects fourth-quarter adjusted EBITDA to be about flat.
Booking Holdings (NASDAQ:BKNG) grew adjusted revenue 9% in the third quarter, then guided fourth-quarter room night growth to just 1% to 3%. Shares fell about 1.3% in after-hours trading. The core business is healthy, but the outlook says the Middle East conflict and softer international travel will slow growth sharply through year-end.
Key numbers
- Room nights: 345 million, up 7% year over year.
- Gross bookings: $54.5 billion, up 10%.
- Revenue: $8.9 billion GAAP, down 1%; $9.8 billion adjusted, up 9%.
- Diluted EPS: $3.61 GAAP, up 7%; $4.66 adjusted, up 17%.
What it means
The revenue decline is a legal charge, not a demand problem. Booking cut revenue by $900 million for a Federal Trade Commission matter and excluded it from adjusted results. The release doesn't explain the matter, so investors can't yet judge whether more costs are coming.
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Earnings per share grew faster than profit because Booking keeps shrinking its share count. GAAP net income dipped slightly, but diluted shares fell about 7.5%. Long-term debt rose this year while buybacks continued, so part of that EPS growth is funded with borrowed money.
Guidance is the bigger story. Booking expects fourth-quarter adjusted EBITDA to be about flat. Its fixed costs keep rising, so when room night growth slows, the operating leverage that lifted earnings works in reverse. Management ties the slowdown to Middle East disruption it assumes will last through year-end. That reads as a travel shock, not a broken business, but it puts a near-term ceiling on profit growth.
What to watch next
Track whether room night growth rebounds once Middle East disruptions ease. Also watch for details on the FTC matter in the quarterly filing.
David Kretzmann has positions in Booking Holdings. The Motley Fool has positions in and recommends Booking Holdings. The Motley Fool has a disclosure policy.