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Why Is Groupon (GRPN) Down 11% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Groupon, Inc. (GRPN - Free Report) . Shares have lost about 11% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Groupon reported earnings of $0.03 per share, much better than the Zacks Consensus Estimate of a loss of $0.02 per share.
Revenues of $935 million beat the Zacks Consensus Estimate of $911 million and also inched up 1.9% on a year-over-year basis. Direct revenues (63.5% of total revenue) increased 3.8% while Third Party & other (36.5% of total revenue) declined 1.2% from the year-ago quarter.
Region-wise, revenues from North America increased 4.5% from the year-ago quarter while that from EMEA and the Rest of World (Asia-Pacific and Latin America) declined 2% and 11.7% year over year, respectively.
On a constant currency basis, Rest of World (Asia-Pacific and Latin America) revenues declined 8% on a year-over-year basis, while EMEA increased 1%.
Gross billings dipped 0.4% year over year to $1.67 billion in the quarter. Region-wise, billings from North America jumped 5.9% year over year. However, billings from EMEA and the Rest of World declined 8.9% and 15.4% year over year, respectively.
On a same-country basis, gross billings grew 2% year over year excluding the unfavorable impact of foreign exchange rates.
North America local gross billings of $1.1 billion grew 5.9% and North America local revenues of $650.8 million grew 4.5% in the reported quarter primarily attributable to new customer additions as well as the acquisition of LivingSocial.
During the quarter, Groupon reduced its country presence to 24 from 47. The company plans to finally operate in 15 countries in Europe and North America.
As of Dec 31, 2016, Groupon had approximately 31.1 million active customers in North America. The company added nearly 5.2 million new customers in the quarter. Active customers were 52.7 million.
Operating Details
Gross margin contracted 100 basis points (bps) on a year-over-year basis to 39.6% in the quarter. The year-over-year decline was primarily attributed to lower Third Party & other gross margin, which fell 120 bps, partially offset by 380 bps increase in Direct gross margin.
North America gross profit increased 14%, EMEA declined 25% and Rest of World slumped 10%. Local gross margins stood at 31.4% as compared to 30.1% in the year ago quarter. On the other hand, Goods margins expanded by 140 bps to 11.7% on the back of improved pricing algorithms.
Adjusted EBITDA margin expanded 130 bps to 8.6% reflecting successful implementations of the company’s streamlining initiatives.
Groupon’s operating expenses dropped 6.3% year over year to $347.8 million due to lower selling, general & administrative expense (SG&A), which was down 11.6%, reflecting the benefits of streamlined operations and lower headcount.
Marketing expenses increased 12.2% from the year-ago quarter due to investments on customer acquisition both online and off-line.
Nevertheless, Groupon reported operating loss of $362.4 million as compared with a loss of $377.2 million reported in the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2016, Groupon had cash and cash equivalents worth $891.8 million as compared with $853.3 million as on Sep 30, 2016.
Free cash flow was $268.9 million up a 14.5% when compared to the year ago quarter.
During the fourth quarter, Groupon repurchased 12,397,795 shares of its common stock for an aggregate purchase price of $49.9 million.
Outlook
For first-quarter 2017, Groupon intends to bring its country count to 15 with respect to its strategy of streamlining its business.
Seasonally, the first quarter is the lightest. Groupon expects to report lowest billings and adjusted EBITDA. However, management expects adjusted EBITDA to be slightly better that the year-ago quarter.
For full-year 2017, Groupon projects gross profit to remain in a range of $1.30 billion to $1.35 billion (for the 15 countries), a jump of $40 million to $90 million from full year 2016 on an FX neutral basis.
Also, adjusted EBITDA is expected to remain in a range of $200 million to $240 million (for the 15 countries), a jump of $16 million to $56 million compared with full year 2016 on an FX neutral basis.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, Groupon's stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Groupon (GRPN) Down 11% Since the Last Earnings Report?
A month has gone by since the last earnings report for Groupon, Inc. (GRPN - Free Report) . Shares have lost about 11% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Groupon reported earnings of $0.03 per share, much better than the Zacks Consensus Estimate of a loss of $0.02 per share.
Revenues of $935 million beat the Zacks Consensus Estimate of $911 million and also inched up 1.9% on a year-over-year basis. Direct revenues (63.5% of total revenue) increased 3.8% while Third Party & other (36.5% of total revenue) declined 1.2% from the year-ago quarter.
Region-wise, revenues from North America increased 4.5% from the year-ago quarter while that from EMEA and the Rest of World (Asia-Pacific and Latin America) declined 2% and 11.7% year over year, respectively.
On a constant currency basis, Rest of World (Asia-Pacific and Latin America) revenues declined 8% on a year-over-year basis, while EMEA increased 1%.
Gross billings dipped 0.4% year over year to $1.67 billion in the quarter. Region-wise, billings from North America jumped 5.9% year over year. However, billings from EMEA and the Rest of World declined 8.9% and 15.4% year over year, respectively.
On a same-country basis, gross billings grew 2% year over year excluding the unfavorable impact of foreign exchange rates.
North America local gross billings of $1.1 billion grew 5.9% and North America local revenues of $650.8 million grew 4.5% in the reported quarter primarily attributable to new customer additions as well as the acquisition of LivingSocial.
During the quarter, Groupon reduced its country presence to 24 from 47. The company plans to finally operate in 15 countries in Europe and North America.
As of Dec 31, 2016, Groupon had approximately 31.1 million active customers in North America. The company added nearly 5.2 million new customers in the quarter. Active customers were 52.7 million.
Operating Details
Gross margin contracted 100 basis points (bps) on a year-over-year basis to 39.6% in the quarter. The year-over-year decline was primarily attributed to lower Third Party & other gross margin, which fell 120 bps, partially offset by 380 bps increase in Direct gross margin.
North America gross profit increased 14%, EMEA declined 25% and Rest of World slumped 10%. Local gross margins stood at 31.4% as compared to 30.1% in the year ago quarter. On the other hand, Goods margins expanded by 140 bps to 11.7% on the back of improved pricing algorithms.
Adjusted EBITDA margin expanded 130 bps to 8.6% reflecting successful implementations of the company’s streamlining initiatives.
Groupon’s operating expenses dropped 6.3% year over year to $347.8 million due to lower selling, general & administrative expense (SG&A), which was down 11.6%, reflecting the benefits of streamlined operations and lower headcount.
Marketing expenses increased 12.2% from the year-ago quarter due to investments on customer acquisition both online and off-line.
Nevertheless, Groupon reported operating loss of $362.4 million as compared with a loss of $377.2 million reported in the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2016, Groupon had cash and cash equivalents worth $891.8 million as compared with $853.3 million as on Sep 30, 2016.
Free cash flow was $268.9 million up a 14.5% when compared to the year ago quarter.
During the fourth quarter, Groupon repurchased 12,397,795 shares of its common stock for an aggregate purchase price of $49.9 million.
Outlook
For first-quarter 2017, Groupon intends to bring its country count to 15 with respect to its strategy of streamlining its business.
Seasonally, the first quarter is the lightest. Groupon expects to report lowest billings and adjusted EBITDA. However, management expects adjusted EBITDA to be slightly better that the year-ago quarter.
For full-year 2017, Groupon projects gross profit to remain in a range of $1.30 billion to $1.35 billion (for the 15 countries), a jump of $40 million to $90 million from full year 2016 on an FX neutral basis.
Also, adjusted EBITDA is expected to remain in a range of $200 million to $240 million (for the 15 countries), a jump of $16 million to $56 million compared with full year 2016 on an FX neutral basis.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Groupon, Inc. Price and Consensus
Groupon, Inc. Price and Consensus | Groupon, Inc. Quote
VGM Scores
At this time, Groupon's stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.