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Priceline (PCLN) Q3 Earnings to See Agency & Merchant Growth

The Priceline Group Inc. PCLN is slated to report third-quarter 2017 earnings on Nov 6 after the bell. We expect the company to perform well this quarter driven by strength in its agency and merchant models.

We observe that shares of Priceline have gained 30.5% year to date, underperforming the industry’s 59.9% rally.

Strong Agency Revenues to Drive International Results

Priceline generates the bulk of its revenues from international markets where the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 16/77% in the second quarter.

We expect agency revenues to grow both sequentially and year-over-year in the to-be-reported quarter, driven by strength across and While is expected to benefit from room night growth, is likely to ride on vacation rental properties growth.

The Zacks Consensus Estimate for agency revenues is pegged at $3.5 billion. In the second quarter, agency revenues had increased 30.6% sequentially and 25.9% year over year.

Agoda and Rentalcars to Boost Merchant Revenues

In the to-be-reported-quarter, merchant revenues are also expected to grow both sequentially and year over year, driven by strength across and While is likely to benefit from discounting in markets, is expected to ride on continuous operational improvements.

The Zacks Consensus Estimate for agency revenues is pegged at $621 million. In the second quarter, merchant revenues were up 12.7% sequentially and 3.8% year over year.

The Priceline Group Inc. Revenue (TTM)

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Priceline has a Zacks Rank #3 and an Earnings ESP of +0.13%. This combination indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

What’s in Favor of Priceline?

The U.S. Commerce Department estimates international travel to the United States to witness CAGR of 3.3% from 2016 to 2021. Inbound travel volumes from Mexico, China, Canada, India and South Korea will be the highest during this period. Visitor volume in 2017 is expected to be up 2.4% from 2016. Since it is a major international player, these trends play into Priceline’s sweet spot and will have an impact on its quarterly performance.

Other Stocks to Consider

Here are some stocks that you may also want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:

NVIDIA Corp. NVDA, with an Earnings ESP of +0.53% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated TXN, with an Earnings ESP of +0.42% and Zacks Rank #1.

Extreme Networks, Inc., EXTR with an Earnings ESP of +9.75% and a Zacks Rank #3.

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