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Affirm (AFRM) Eyes Q2 Earnings Beat on High Consumer Spending

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Affirm Holdings, Inc. (AFRM - Free Report) is set to beat earnings estimates for second-quarter fiscal 2022, whose results are set to be released on Feb 10, after the closing bell.

In the last reported quarter, the leading payment network’s adjusted loss per share of 40 cents missed the Zacks Consensus Estimate of a loss of 30 cents, primarily due to escalating operating costs. A significant jump in sales and marketing, and technology and data analytics expenses affected the bottom line.

Let’s see how things have improved prior to the second-quarter fiscal 2022 earnings announcement.

Trend in Estimate Revision

In the past 30 days, the Zacks Consensus Estimate for second-quarter fiscal 2022 loss per share of 44 cents has witnessed one upward and downward revision each. This estimate is indicative of a 2.2% improvement from the year-ago reported figure. Similarly, the Zacks Consensus Estimate for revenues is pegged at $330.1 million, suggesting an increase of 61.8% from the year-ago reported figure.

Affirm beat earnings estimates once in the trailing four quarters and missed thrice, delivering an average negative surprise of 51.8%. This is depicted in the graph below.

Affirm Holdings, Inc. Price and EPS Surprise

Affirm Holdings, Inc. Price and EPS Surprise

Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Earnings ESP for the company is currently +16.57%. This is because the Most Accurate Estimate is currently pegged at a loss of 37 cents per share, narrower than the Zacks Consensus Estimate of a loss of 44 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Affirm currently holds a Zacks Rank #3.

Factors Driving Better-Than-Expected Earnings

The payment solution provider is expected to have gained from the rise in consumer spending in the December quarter. Overall economic recovery aided consumer spending growth, thanks to the relaxation of COVID-related restrictions and travel bans. This is likely to have triggered an increase in the numbers of active merchants and consumers. As such, its sales figures from the merchant network and the virtual card network are likely to have risen.

Gross Merchandise Volume for second-quarter fiscal 2022 is likely to have been aided by growth in partnerships with merchants and the frequency of engagement. Affirm anticipates Gross Merchandise Volume for the quarter under review within $3.55-$3.65 billion, indicating a rise from $2.1 billion in the year-ago period. This is likely to have positioned the company for a year-over-year rise in profits.

AFRM’s expanded partnership with Amazon.com, Inc. (AMZN - Free Report) is likely to have brought more customers to Affirm’s network, boosting its platform usage and positioning it for an earnings beat. Amazon’s exclusive third-party buy now, pay later solution is expected to have increased the demand for Affirm’s services.

Affirm expects second-quarter fiscal 2022 transaction costs within $143-$148 million, indicating growth from $114.1 million in the year-ago period. This might have partially offset the positives from the factors mentioned above.

Other Stocks That Warrant a Look

Here are some other companies from the Business Services space that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

FactSet Research Systems Inc. (FDS - Free Report) has an Earnings ESP of +0.29% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems’ bottom line for the to-be-reported quarter is expected to rise 8.8% year over year.

S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +1.33% and a Zacks Rank #3.

S&P Global’s bottom line for the to-be-reported quarter is expected to grow 15.5% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.