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Priceline Gains as Earnings Top Estimates on Overseas Travel

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Priceline Group Inc.’s earnings topped analysts’ estimates, pushing shares of the largest U.S. online travel agent to their biggest gain in more than two years.

Growth buoyed by increased international bookings helped Priceline overcome volatile foreign-exchange rates, said Chief Executive Officer Darren Huston.

“When currencies move, it changes behavior, but for every dark spot, there’s a bright spot,” he said in a telephone interview. “So for Americans, if you haven’t gone to Europe or Japan, now’s a great time.”

Fourth-quarter earnings excluding some items were $10.85 a share on sales of $1.84 billion, the Norwalk, Connecticut-based company said in a statement Thursday. Analysts had projected $10.05 a share and revenue of $1.8 billion on average, according to data compiled by Bloomberg.

The company’s shares rose 8.5 percent to close at $1,218.05 in New York, logging their biggest one-day gain since July 2012.

Acquisition Binge

Priceline, whose sites include Booking.com and Kayak, has been acquiring companies and striking partnerships to compete with existing rivals and new entrants like Google Inc. as the online travel-booking industry consolidates.

The company last year purchased about a 10 percent stake in Ctrip, China’s largest travel website, and bought restaurant-reservation service OpenTable Inc. Since the OpenTable purchase, Priceline has redesigned the website and is expanding the brand overseas.

This year “will be an opportunity to really get some growth out of that asset,” Huston said. The Wall Street Journal reported Thursday that Priceline is in talks to buy Rocketmiles, a hotel- and travel-booking startup. Huston declined to comment.

Priceline’s fourth-quarter bookings, the total value of services purchased by customers, rose 17 percent from a year earlier to $10.7 billion. International bookings rose 19 percent to $9.23 billion.

Unfavorable exchange rates in recent months have reduced travel from Russia to Europe and from Europe to the U.S. Huston said he expected that travel by Americans overseas would help compensate. Priceline’s foreign-exchange transaction losses totaled $17.6 million last year, compared with $10.2 million in

2013.

Priceline’s “broad geographic mix,” with operations in more than 200 countries, has helped counter headwinds from foreign-exchange rates, said Michael Millman, an analyst at Millman Research Associates.

Forecasting Gains

Priceline forecast a gain of about 3 percent to 10 percent in first-quarter international bookings and an increase of about 2 percent to 9 percent in total bookings.

The company’s earnings forecast for the quarter was below analysts’ estimates. Priceline predicted revenue would rise 4 to 11 percent from a year earlier and profit would be $7.20 to $7.75 a share. Analysts predicted that sales would rise 13 percent to $1.86 billion, with profit of $8.46 a share.

Priceline said it would buy back $3 billion in shares.

Competition in the online travel-booking industry has heated up recently, with large companies including Priceline snapping up smaller sites to fuel growth. Expedia Inc. agreed last week to purchase Orbitz Worldwide Inc. for $1.34 billion, bumping Priceline out of the top spot in total bookings worldwide.

“I don’t see the move to Orbitz as a net negative for us,” Huston said. “In fact, it clarifies competition.” Priceline has a different acquisition strategy from Expedia and is focused on buying companies to add geographic breadth and new business lines, he said.

“It’s an increasingly competitive landscape,” said Dan Kurnos, an analyst at Benchmark Co., “but typically, Priceline has weathered the storm.”

(Updates with closing share price in fifth paragraph.)
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