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Zynga (ZNGA) to Report Q2 Earnings: Is a Surprise in Store?

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Zynga Inc. (ZNGA - Free Report) is set to report second-quarter 2017 results on Aug 2.

Last quarter, the company posted in-line results. Notably, in the trailing four quarters, the company missed estimates on two occasions and came in line in the remaining two, resulting in an average negative earnings surprise of 20.83%.

In the last reported quarter, despite a 4% jump, revenues of $194.3 million missed the Zacks Consensus estimate of $196 million.

Moreover, we note that Zynga has underperformed the industry over the last one year. The stock increased 25.4% compared with 28% gain recorded by the industry.

For second-quarter 2017, the company projects revenues to be approximately $200 million. Booking is expected to be $205 million.

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

Factors at Play

Zynga is one of the leading game developers and has been seeing strength in the mobile game market. In addition, its cost-cutting initiatives are a positive. We expect franchises like Words With Friends and Zynga Poker, as well as new games like CSR 2, FarmVille: Tropic Escape and Dawn of Titans to drive its top line. Acquisition of Solitaire games will also boost results.

However, Zynga has been witnessing slow user growth for a while, which remains a major headwind. Moreover, a sluggish web business, along with intensifying competition from the likes of Glu Mobile, Electronic Arts (EA - Free Report) and Nintendo, remains a concern.

Zynga Inc. Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Zynga will beat on earnings this quarter. 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. This is not the case here as you will see below.

Zacks ESP: Earnings ESP for Zynga is 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate are pegged at breakeven. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

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

Stocks to Consider

Here are some companies which, as per our model, have the right combination of elements to post an earnings beat this quarter.

Kemet Corporation (KEM - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay Intertechnology, Inc. (VSH - Free Report) has an Earnings ESP of +6.06% and a Zacks Rank #1.

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