A month has gone by since the last earnings report for Zillow Group (ZG Quick QuoteZG - Free Report) . Shares have lost about 4.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zillow 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 catalysts.

Zillow Group Q2 Earnings Beat Despite Flat Revenues Y/Y

Zillow Group reported relatively healthy second-quarter 2023 results, wherein the bottom-line and top-line beat the respective Zacks Consensus Estimates.

Despite solid momentum in rental revenues, declining trends in residential revenues, owing to increasing interest rate volatility, and home price fluctuations impeded the company’s revenue growth during the quarter.

Net Income

In the reported quarter, net loss on a GAAP basis was $35 million or a loss of 15 cents per share against a net income of $8 million or 3 cents per share in the prior-year quarter. The decline was primarily due to higher operating expenses during the quarter.

On a non-GAAP basis, the company’s net income stood at $99 million or 39 cents per share compared with $100 million or 38 cents per share in the year-ago quarter. Non-GAAP net income for the reported quarter beat the Zacks Consensus Estimate by 21 cents.

Revenues

Quarterly net sales aggregated $506 million compared with $504 million reported in the year-ago quarter. Lower residential and mortgage revenues hindered the top line. The top line surpassed the Zacks consensus estimate of $476 million.

Residential revenues were $380 million, down 3% year over year from $392 million reported in the year-ago quarter. Net sales from this vertical surpassed the Zacks consensus estimate of $352.8 million. Volatility in mortgage interest rates, home price fluctuations, and fewer new for-sale listings impacted the revenues from this segment.

However, residential net sales were at the high end of management’s expectations and outperformed the industry trends. Although the overall housing market situation remains challenging, favorable tailwinds compared to the industry and a greater number of customer connections to premier agent partners partially cushioned the net sales in this vertical.

Rental revenues in the quarter improved by 28% year over year to $91 million. Segment top line beat the Zacks consensus estimate of $79.52 million. More signups for multi-family properties and greater single-family listings combined with enhancement in Zillow’s Rentals marketplace to improve the renting experience boosted the revenues in this vertical.

The mortgages segment generated $24 million in revenues, down from $29 million in the year-earlier quarter. Net sales fell short of the Zacks Consensus Estimate of $25.4 million. Higher interest rates affected demand and impeded the top line in this vertical.

Other Details

Gross profit during the quarter stood at $402 million compared with $407 million in the prior-year quarter. The decline was primarily due to lower revenues. Operating expenses during the quarter were $469 million, up 17% year over year from $402 million in the year-ago quarter. Adjusted EBITDA was $111 million, down from $145 million in the prior-year quarter. Despite the year-over-year decline, adjusted EBITDA figure was above the midpoint of the company guidance.

Cash Flow & Liquidity

Zillow Group generated $193 million in cash from operating activities in the first six months of 2023 compared with $4,255 million in the prior-year period. As of Jun 30, 2023, the company had $1,566 million in cash and cash equivalents with $126 million of lease liabilities, net of current portion.

Outlook

For the third quarter of 2023, Zillow Group expects total revenues to be in the range of $458-$486 million. Residential revenues are expected in the band of $339 to $359 million.  Adjusted EBITDA is estimated to be in the range of $67 million to $87 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -157.14% due to these changes.

VGM Scores

At this time, Zillow has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zillow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Zillow belongs to the Zacks Internet - Services industry. Another stock from the same industry, Uber Technologies (UBER Quick QuoteUBER - Free Report) , has gained 2.9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.

Uber reported revenues of $9.23 billion in the last reported quarter, representing a year-over-year change of +14.3%. EPS of $0.18 for the same period compares with -$1.33 a year ago.

For the current quarter, Uber is expected to post earnings of $0.13 per share, indicating a change of +121.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +44.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Uber. Also, the stock has a VGM Score of C.