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Can Square (SQ) Pull Off a Surprise this Earnings Season?

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Payments and point-of-sale (POS) services provider  Square, Inc. (SQ - Free Report) is slated to report second-quarter 2017 earnings on Aug 2.

The company has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult. This is because per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement.

However, Square’s surprise history has been quite impressive, since the company has beaten estimates in each of the last four quarters with an average positive surprise of 45.84%.

Year to date, the stock has outperformed the industry it belongs to. It gained a massive 92.2% compared with the industry’s gain of 18.2%.

What Happened in the First Quarter?

Square reported narrower-than-expected first-quarter 2017 loss with revenues beating the Zacks Consensus Estimate. Adjusted loss came in at 3 cents per share. Revenues came in at $461.6 million.

Year over year, net loss narrowed significantly driven by strong top-line growth, ongoing operating leverage and improvements in transaction loss rates.

What We Are Watching this Time

Square continues to add Invoices sellers, reaping benefits from the integration of Invoices into the Square app. The company continues to expand its industry-specific solutions, thereby increasing the reach of sellers and enhancing sales.

Square, Inc. Price and EPS Surprise

We expect Square’s comprehensive commerce ecosystem, accelerated business growth and focus on integration, automation, and platform to drive growth. The company has the capacity of consistent business growth through balancing investment and margin expansion.

On the flip side, the company is vulnerable to intense competition and changing technology, industry standards and seller and buyer needs.

Square expects second-quarter net revenue between $532 million and $538 million. Adjusted EBITDA is expected in the range of $25 million to $28 million. Adjusted EPS is expected between 3 cents and 5 cents.

Stocks that Warrant a Look

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

Symantec Corporation , with an Earnings ESP of +16.67% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics, Inc. (ARW - Free Report) , with an Earnings ESP of +1.13% and a Zacks Rank #2.

The Priceline Group Inc. , with an Earnings ESP of +2.31% and a Zacks Rank #3.

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