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Groupon (GRPN) Q2 Earnings: Is a Surprise in the Cards?
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Groupon, Inc. (GRPN - Free Report) is set to release second-quarter 2016 results on Jul 27. In the last quarter, the company reported a positive earnings surprise of 25.00%. The company delivered positive earnings surprises in three of the last four quarters, with an average positive earnings surprise of 46.25%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Since the end of 2015, Groupon is undergoing a business transition as it shifts its focus from rapid international expansion to developing its local core business. The company has also been taking a number of strategic initiatives to streamline its operations. It has also increased its marketing spend, which should boost its business to a great extent.
Last month the company signed a multi-year Enterprise Adoption Agreement (EAA) with Splunk Inc. . The company is leveraging Splunk’s offerings to obtain real-time insights pertaining to operations, thereby enhancing its own platform. In addition, its OrderUp division collaborated with Qdoba Mexican Eats to deliver Mexican food from various eateries to over 675 locations across the U.S., thereby substantially expanding its presence. We believe that though the full impact of these initiatives will not be visible in the to-be reported quarter, it will have some impact on the company’s financials.
In June, the company declared its plans to divest its Indonesian business to KFit Holdings Pte Ltd. Though Groupon will not be involved in the operations of the Indonesia business any more, it will still have a significant stake. As it has already initiated the divestment process, we believe there can be some impact on the company’s business.
Moreover, Groupon is investing quite a bit in the transition, which is expected to affect its profits in the near-term. Competition from giants like eBay and Amazon.com (AMZN - Free Report) and impending lawsuits are the other headwinds investors need to watch out for.
Our proven model does not conclusively show that Groupon is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents per share.
Zacks Rank: Groupon carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here is a company that has the right combination of elements, according to our model, to post an earnings beat this quarter:
General Dynamics Corp. (GD - Free Report) has an earnings ESP of +2.17% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Groupon (GRPN) Q2 Earnings: Is a Surprise in the Cards?
Groupon, Inc. (GRPN - Free Report) is set to release second-quarter 2016 results on Jul 27. In the last quarter, the company reported a positive earnings surprise of 25.00%. The company delivered positive earnings surprises in three of the last four quarters, with an average positive earnings surprise of 46.25%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Since the end of 2015, Groupon is undergoing a business transition as it shifts its focus from rapid international expansion to developing its local core business. The company has also been taking a number of strategic initiatives to streamline its operations. It has also increased its marketing spend, which should boost its business to a great extent.
Last month the company signed a multi-year Enterprise Adoption Agreement (EAA) with Splunk Inc. . The company is leveraging Splunk’s offerings to obtain real-time insights pertaining to operations, thereby enhancing its own platform. In addition, its OrderUp division collaborated with Qdoba Mexican Eats to deliver Mexican food from various eateries to over 675 locations across the U.S., thereby substantially expanding its presence. We believe that though the full impact of these initiatives will not be visible in the to-be reported quarter, it will have some impact on the company’s financials.
In June, the company declared its plans to divest its Indonesian business to KFit Holdings Pte Ltd. Though Groupon will not be involved in the operations of the Indonesia business any more, it will still have a significant stake. As it has already initiated the divestment process, we believe there can be some impact on the company’s business.
Moreover, Groupon is investing quite a bit in the transition, which is expected to affect its profits in the near-term. Competition from giants like eBay and Amazon.com (AMZN - Free Report) and impending lawsuits are the other headwinds investors need to watch out for.
GROUPON INC Price and EPS Surprise
GROUPON INC Price and EPS Surprise | GROUPON INC Quote
Earnings Whispers
Our proven model does not conclusively show that Groupon is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents per share.
Zacks Rank: Groupon carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here is a company that has the right combination of elements, according to our model, to post an earnings beat this quarter:
General Dynamics Corp. (GD - Free Report) has an earnings ESP of +2.17% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>