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What's in the Cards for MINDBODY (MB) in Q3 Earnings?

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MINDBODY, Inc. MB is set to report third-quarter 2016 results on Oct 26. Last quarter, the company reported a positive earnings surprise of 15.8%. Let us see how things are shaping up for this announcement.

Factors to Consider

MINDBODY develops cloud-based business management software and payments platform for the wellness services industry. The company provides its services to approximately 42,000 businesses in over 124 countries worldwide. With such a huge client base, the company is expected to post impressive earnings numbers in the third quarter.

The company reported encouraging second-quarter results, with the top line surpassing the Zacks Consensus Estimate. Though the company posted a loss, the reported figure was narrower than the Zacks Consensus Estimate.

MINDBODY’s gross margin for the second quarter was 68.1%, up from 64.4% reported in the year-ago quarter. The year-over-year growth in gross margin was primarily due to a higher revenue base.

Furthermore, significant investments in growth areas for improving implementation timelines, particularly for web and mobile applications products, will boost profitability. This is likely to be reflected in the company’s third-quarter results.

MINDBODY INC-A Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that MINDBODY is likely to beat the Zacks Consensus Estimate in the upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for MINDBODY is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 17 cents per share.

Zacks Rank: MINDBODY has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies, which are worth considering, as our model shows that they have the right combination of these two elements:

Amazon.com, Inc. (AMZN - Free Report) with Earnings ESP of +10.47% and a Zacks Rank #1

STMicroelectronics NV STM with Earnings ESP of +9.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here

HubSpot, Inc. HUBS with Earnings ESP of +13.89% and a Zacks Rank #3

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