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PayPal (PYPL) to Report Q3 Earnings: What's in the Cards?

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PayPal Holdings, Inc. (PYPL - Free Report) is set to report third-quarter 2018 results on Oct 18.

The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive earnings surprise of 4.86%.

In the last reported quarter, PayPal’s earnings of 58 cents per share grew 28% on a year-over-year basis and 1.7% sequentially. The figure also delivered a positive earnings surprise of 3.57%.

Net revenues increased 23% year over year and 4.6% sequentially to $3.86 billion beating the Zacks Consensus Estimate of $3.82 billion.

Improving total active accounts on the back of expanding customer base drove year-over-year growth. Moreover, Moreover, the company’s growing number of strategic acquisitions and robust performance of Choice remained positive throughout the quarter to be reported.

For third-quarter 2018, PayPal expects revenues between $3.62 billion and $3.67 billion. Non-GAAP earnings are anticipated to lie within the range of 53-55 cents per diluted share.

Let’s see how things are shaping up for this quarter.

Key Metrics to Consider

Active customer accounts and total payment volume (“TPV”) forms the basis of PayPal’s business. The company has been witnessing massive growth in these two metrics over the past several quarters.

For the third quarter, the Zacks Consensus Estimate for active customer accounts is pegged at 251, which shows year-over-year growth of 15.1%. Further, the consensus estimate for TPV is projected at $145.03 billion, reflecting an improvement of 27.2% from the year-ago quarter.

PayPal is currently riding on its well-performing Venmo, Choice and One Touch which are aiding the expansion of its customer base. Further, strengthening presence in the global market and strategic partnerships are major positives.

Additionally, strengthening merchant base and rapidly increasing mobile payment volume driven by growing penetration of smartphone and internet usage globally are driving the adoption rate of the company’s payment solutions.

All these factors have led to the upswing in the above mentioned metrics.

PayPal Holdings, Inc. Price and EPS Surprise

 

PayPal Holdings, Inc. Price and EPS Surprise | PayPal Holdings, Inc. Quote

Strategic Partnerships to Drive Growth

In the to-be-reported quarter, the company entered into quite a few strategic partnerships which are likely to drive the upcoming quarterly results.

During the third quarter, PayPal extended its partnership with Uber to make its Venmo available to the Uber customers which will ensure seamless payment for the rides and foods. This remains positive for the growing adoption rate of Venmo.

Further, the company’s international money transfer service called Xoom teamed up with TransNetwork to enable its U.S. customers in sending money to their family and friends at any OXXO location in Mexico.

Additionally, Xoom partnered with Euronet Worldwide’s subsidiary Ria which will bolster the company’s presence in Easter Europe and Africa. This partnership will enable Xoom customers to avail cash pick up facility at 150,000 of Ria’s international network locations.

Moreover, the company’s partnership with MasterCard continues to aid the adoption rate of Venmo. Further, its extended tie-up with Alphabet’s (GOOGL - Free Report) Google and eBay (EBAY - Free Report) will continue to bolster its momentum.

We believe all these strong endeavors will keep strengthening the customer base of the company which in turn is likely to drive its top-line growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PayPal currently has a Zacks Rank #1 and an Earnings ESP of +0.12%. Our proven model indicates that the company is likely to beat the estimates in the third quarter.

Stock That Warrants a Look

Here is a stock worth considering as our model shows that it has the right combination of elements to deliver an earnings beat in the upcoming releases.

Salesforce.com (CRM - Free Report) has an Earnings ESP of +0.5% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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