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Will Rising Expenses Dampen Affirm's (AFRM) Q2 Earnings?
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Affirm Holdings, Inc. (AFRM - Free Report) is set to report its second-quarter fiscal 2024 results on Feb 8, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter fiscal 2024 earnings per share of 7 cents suggests a 106.4% improvement from the prior-year loss of $1.10. The estimate remained stable over the past week. The consensus estimate for second-quarter fiscal 2024 revenues of $518.4 million indicates a 29.8% increase from the year-ago reported figure.
Affirm beat on earnings in two of the trailing four quarters and missed twice, the average negative surprise being 16.2%. This is depicted in the graph below.
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AFRM’s previous-quarter performance first.
Q1 Earnings Rewind
In the last reported quarter, this leading payment network reported adjusted break-even per share, which missed the Zacks Consensus Estimate of earnings of 8 cents, caused by higher operating expenses. Also, a decline in servicing income affected the results. The negatives were partially offset by increased merchants, GMV, transactions and interest income.
Travel and entertainment-related spendings are expected to have been resilient in the quarter under review. This, in turn, is likely to have augmented the strength of active merchants and consumers. The Zacks Consensus Estimate for active consumers indicates 15.3% year-over-year growth.
The Zacks Consensus Estimate for merchant network revenues is pegged at $160.7 million, indicating a jump of 19.9% from a year ago. Also, the consensus mark for servicing income indicates a 2.4% year-over-year increase to $22 million. The company expects the weighted average shares outstanding to be 308 million in the to-be-reported quarter.
The sales figures from the virtual card networks are anticipated to have risen. The Zacks Consensus Estimate for virtual card network revenues is pegged at $35.8 million, indicating a 22.9% year-over-year rise. Affirm anticipates second-quarter fiscal 2024 GMV to be $6.7-$6.9 billion, signaling a jump from $5.7 billion a year ago.
The consensus mark for interest income in second-quarter fiscal 2024 is pegged at $266.14 million, indicating a 71.3% jump from the previous-year quarter’s $155.3 million, primarily due to its pricing initiatives and the high interest rate environment.
The above-mentioned factors are expected to have positioned the company for year-over-year growth in the second-quarter fiscal 2024. However, the positives are likely to have been partially offset by lower gains on sales of loans and higher operating costs.
The Zacks Consensus Estimate for gain on sales of loans suggests a 44.7% year-over-year decline to $33 million. The company expects transaction costs to be within $310-$320 million, significantly higher than the year-ago level of $255.4 million.
Operating costs are likely to have increased in the quarter under review due to higher processing, servicing and funding costs, affecting the bottom line and making an earnings beat uncertain. Also, increased provision for credit losses, as a result of growing rainy day funds, are anticipated to have reduced profits.
Earnings Whispers
Our proven model does not conclusively predict 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. That is not the case here, as you will see below.
Earnings ESP: The company currently has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at an earnings of 7 cents per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Affirm currently carries a Zacks Rank #2.
Stocks to Consider
While an earnings beat looks uncertain for Affirm, here are some companies from the broader Business Services space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 29 cents per share, which suggests a 20.8% year-over-year jump. The estimate remained stable over the past week. PAGS beat earnings estimates in all the past four quarters, with an average surprise of 9%.
Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +3.40% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Fidelity National’s bottom line for the to-be-reported quarter is pegged at 95 cents per share, which remained stable for the past week. It beat earnings thrice in the past four quarters and missed once. Furthermore, the consensus mark for FIS’ revenues is pegged at more than $2.5 billion.
S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank of 2.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.15 per share, indicating 24% year-over-year growth. SPGI beat earnings estimates in three of the past four quarters and met once, with an average surprise of 4%.
Image: Bigstock
Will Rising Expenses Dampen Affirm's (AFRM) Q2 Earnings?
Affirm Holdings, Inc. (AFRM - Free Report) is set to report its second-quarter fiscal 2024 results on Feb 8, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter fiscal 2024 earnings per share of 7 cents suggests a 106.4% improvement from the prior-year loss of $1.10. The estimate remained stable over the past week. The consensus estimate for second-quarter fiscal 2024 revenues of $518.4 million indicates a 29.8% increase from the year-ago reported figure.
Affirm beat on earnings in two of the trailing four quarters and missed twice, the average negative surprise being 16.2%. This is depicted in the graph below.
Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AFRM’s previous-quarter performance first.
Q1 Earnings Rewind
In the last reported quarter, this leading payment network reported adjusted break-even per share, which missed the Zacks Consensus Estimate of earnings of 8 cents, caused by higher operating expenses. Also, a decline in servicing income affected the results. The negatives were partially offset by increased merchants, GMV, transactions and interest income.
Now, let’s see how things have shaped up prior to the second-quarter fiscal 2024 earnings announcement.
Q2 Factors to Note
Travel and entertainment-related spendings are expected to have been resilient in the quarter under review. This, in turn, is likely to have augmented the strength of active merchants and consumers. The Zacks Consensus Estimate for active consumers indicates 15.3% year-over-year growth.
The Zacks Consensus Estimate for merchant network revenues is pegged at $160.7 million, indicating a jump of 19.9% from a year ago. Also, the consensus mark for servicing income indicates a 2.4% year-over-year increase to $22 million. The company expects the weighted average shares outstanding to be 308 million in the to-be-reported quarter.
The sales figures from the virtual card networks are anticipated to have risen. The Zacks Consensus Estimate for virtual card network revenues is pegged at $35.8 million, indicating a 22.9% year-over-year rise. Affirm anticipates second-quarter fiscal 2024 GMV to be $6.7-$6.9 billion, signaling a jump from $5.7 billion a year ago.
The consensus mark for interest income in second-quarter fiscal 2024 is pegged at $266.14 million, indicating a 71.3% jump from the previous-year quarter’s $155.3 million, primarily due to its pricing initiatives and the high interest rate environment.
The above-mentioned factors are expected to have positioned the company for year-over-year growth in the second-quarter fiscal 2024. However, the positives are likely to have been partially offset by lower gains on sales of loans and higher operating costs.
The Zacks Consensus Estimate for gain on sales of loans suggests a 44.7% year-over-year decline to $33 million. The company expects transaction costs to be within $310-$320 million, significantly higher than the year-ago level of $255.4 million.
Operating costs are likely to have increased in the quarter under review due to higher processing, servicing and funding costs, affecting the bottom line and making an earnings beat uncertain. Also, increased provision for credit losses, as a result of growing rainy day funds, are anticipated to have reduced profits.
Earnings Whispers
Our proven model does not conclusively predict 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. That is not the case here, as you will see below.
Earnings ESP: The company currently has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at an earnings of 7 cents per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Affirm currently carries a Zacks Rank #2.
Stocks to Consider
While an earnings beat looks uncertain for Affirm, here are some companies from the broader Business Services space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
PagSeguro Digital Ltd. (PAGS - Free Report) has an Earnings ESP of +10.35% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 29 cents per share, which suggests a 20.8% year-over-year jump. The estimate remained stable over the past week. PAGS beat earnings estimates in all the past four quarters, with an average surprise of 9%.
Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +3.40% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Fidelity National’s bottom line for the to-be-reported quarter is pegged at 95 cents per share, which remained stable for the past week. It beat earnings thrice in the past four quarters and missed once. Furthermore, the consensus mark for FIS’ revenues is pegged at more than $2.5 billion.
S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank of 2.
The Zacks Consensus Estimate for S&P Global’s bottom line for the to-be-reported quarter is pegged at $3.15 per share, indicating 24% year-over-year growth. SPGI beat earnings estimates in three of the past four quarters and met once, with an average surprise of 4%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.