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What's in the Cards for Square (SQ) this Earnings Season?
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Square, Inc. (SQ - Free Report) is set to report third-quarter 2016 results on Nov 1. The company is a leading provider of payment processing, point-of-sale (POS), and marketing services worldwide. It completed its initial public offering (IPO) in Nov 2015. Last quarter, the company posted a 27.27% positive earnings surprise.
Let’s see how things are shaping up for this announcement.
Factors at Play
Strong Growth: In the second quarter of 2016, Square’s core payments business was strong and witnessed growth. Gross payment volume (GPV) was $12.5 billion, a significant 42% increase on a year-over-year basis.
Software and Services: The company launched scheduled and recurring invoices and card on file. Square continues to innovate with its software and services to enhance their accessibility in both existing and potential markets.
Contactless Chip Reader: It continues to gain traction in the market for making payments through the phone.
Square Capital: Ithas added five new investors in the second quarter. Square invested $189 million in Square Capital, up 23% sequentially and 123% year over year.
Q3 Guidance: The company expects adjusted revenues to be anywhere between $167 million to $171 million, and adjusted EBITDA between $5 million and $6 million. That's a 17 point year-over-year margin improvement at the midpoint.
Full year guidance: Last quarter, the company raised its full-year guidance. Adjusted revenue is expected to be between $655 million and $670 million, a 6% improvement at the mid-point from the previous guidance range. Adjusted revenue is expected to be between $18 million and $24 million, an improvement from the previous guidance range of $8 million to 14 million. That's a 12 point year-over-year margin improvement at the midpoint.
Our proven model does not conclusively show that Square will 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: Both the Most Accurate Estimate and Zacks Consensus Estimate stand at a loss of 11 cents, Hence, the difference is 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Square has a Zacks Rank #2, which when combined with a 0.00% ESP, makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
Boyd Gaming Corporation (BYD - Free Report) , with an Earnings ESP of +16.67% and a Zacks Rank #2.
NVIDIA Corporation (NVDA - Free Report) , with an Earnings ESP of +8.93% and a Zacks Rank #3.
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What's in the Cards for Square (SQ) this Earnings Season?
Square, Inc. (SQ - Free Report) is set to report third-quarter 2016 results on Nov 1. The company is a leading provider of payment processing, point-of-sale (POS), and marketing services worldwide. It completed its initial public offering (IPO) in Nov 2015. Last quarter, the company posted a 27.27% positive earnings surprise.
Let’s see how things are shaping up for this announcement.
Factors at Play
Strong Growth: In the second quarter of 2016, Square’s core payments business was strong and witnessed growth. Gross payment volume (GPV) was $12.5 billion, a significant 42% increase on a year-over-year basis.
Software and Services: The company launched scheduled and recurring invoices and card on file. Square continues to innovate with its software and services to enhance their accessibility in both existing and potential markets.
Contactless Chip Reader: It continues to gain traction in the market for making payments through the phone.
Square Capital: Ithas added five new investors in the second quarter. Square invested $189 million in Square Capital, up 23% sequentially and 123% year over year.
Q3 Guidance: The company expects adjusted revenues to be anywhere between $167 million to $171 million, and adjusted EBITDA between $5 million and $6 million. That's a 17 point year-over-year margin improvement at the midpoint.
Full year guidance: Last quarter, the company raised its full-year guidance. Adjusted revenue is expected to be between $655 million and $670 million, a 6% improvement at the mid-point from the previous guidance range. Adjusted revenue is expected to be between $18 million and $24 million, an improvement from the previous guidance range of $8 million to 14 million. That's a 12 point year-over-year margin improvement at the midpoint.
SQUARE INC Price and EPS Surprise
SQUARE INC Price and EPS Surprise | SQUARE INC Quote
Earnings Whispers
Our proven model does not conclusively show that Square will 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: Both the Most Accurate Estimate and Zacks Consensus Estimate stand at a loss of 11 cents, Hence, the difference is 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Square has a Zacks Rank #2, which when combined with a 0.00% ESP, makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:
Veeco Instruments Inc. (VECO - Free Report) with an Earnings ESP of +17.86% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boyd Gaming Corporation (BYD - Free Report) , with an Earnings ESP of +16.67% and a Zacks Rank #2.
NVIDIA Corporation (NVDA - Free Report) , with an Earnings ESP of +8.93% and a Zacks Rank #3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>