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Booking Holdings: Strong Brands,
Strong Cash Flows and Strong Growth

Ingrid Hendershot, CFA, Hendershot Investments Inc. recently “Spotlighted” Booking Holdings (BKNG) the world leader in online travel and related services, provided to customers and partners in over 220 countries through six primary brands – Booking.com, priceline.com, KAYAK, agoda.com, rentalcars.com, and OpenTable. Booking Holdings helps people experience the world by providing consumers, travel service providers and restaurants with leading travel and restaurant reservation and related services. Here is Hendershot’s analysis of Booking Holdings.

Strong Brands

Booking Holdings was launched in 1998 in the U.S. under the priceline.com brand. Since then, the operations have expanded to include other strong travel-related brands, including Booking.com, agoda.com, rentalcars.com, KAYAK and OpenTable.

Booking.com is available in 40 languages and is the most profitable and largest online accommodation reservation service in the world with more than one and a half million properties, including more than 390,000 vacation rental properties, in more than 220 countries. Agoda.com is a leading online accommodation reservation service catering primarily to consumers in the Asia-Pacific region.

Rentalcars.com is a multinational car hire service, offering its reservation services in over 53,000 locations, including more than 900 airports throughout the world.

Priceline.com offers leisure travelers, primarily in the U.S., multiple ways to save on airline tickets, hotel rooms, car rentals, vacation packages and cruises.

KAYAK, acquired in 2013, is a leading travel research site allowing people to easily compare hundreds of travel sites when searching for flights, hotels and rental cars. OpenTable, acquired in 2014, is a leading brand for booking online restaurant reservations. OpenTable primarily does business in the United States with plans to expand internationally.

Strong Cash Flow

Booking Holdings’ business is not capital intensive and thus generates very strong free cash flows, which have steadily and rapidly grown from $140 million in 2007 to $4.4 billion in 2017.

Through the first nine months of 2018, free cash flow increased an additional 19% to $3.9 billion. Thanks to the strong cash flows, the company ended the 9-30-2018 quarter with more than $7.5 billion in cash and investments (net of debt) on its hospitable balance sheet, after spending $4.1 billion on share repurchases during the first nine months of the year.

Strong Growth

Since 2013, Booking Holdings has provided jet-setting growth with revenues soaring at a 17% annual rate to $12.7 billion in 2017 and net income compounding at a 6% annual rate to $2.3 billion.

The company’s business is highly profitable with its five-star 20.8% return on shareholders’ equity in 2017.

Third Quarter 2018

Booking Holdings reported better than expected booking growth in the third quarter as European travel increased as weather improved and the World Cup ended. Revenues in the third quarter increased 9% to $4.8 billion with net income up 3% to $1.8 billion and EPS up 8% to $37.02.

Third quarter gross travel bookings increased 12% over the prior year to $24.3 billion. Room nights booked increased 13% to 201.3 million, reaching a new milestone of more than 200 million room nights booked in a single quarter. The number of restaurants on OpenTable is up 55% since Booking Holdings acquired the company with more than 330 million diners seated since 2014.

Fourth quarter bookings are expected to increase 6% to 9% with revenue expected to increase 13% to 16% and EPS expected to climb 12% to 15%.

Long-term investors should consider booking a reservation with Booking Holdings, a HI-quality company with strong brands, strong cash flows and strong growth. Buy.

Editor’s Note: Founded in 1994, Hendershot Investments Inc. provides investment management, financial planning and a high level of personal service for those with $250,000 or more in investable assets. For more information visit www.hendershotinvestments.com.

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