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GoPro (GPRO) to Report Q2 Earnings: A Beat in Store?

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GoPro, Inc. (GPRO - Free Report) is slated to release second-quarter 2017 results, after the closing bell on Aug 3.

The company has had a decent earnings history, having beaten estimates thrice over the trailing four quarters, for a modest average positive surprise of 4.2%. Last quarter, GoPro trumped estimates by 1.9%.

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

Factors to Consider

GoPro’s HERO5 cameras are enjoying impressive market traction and this is likely to reflect well on the company’s quarterly results. The HERO5 camera is proving to be particularly popular in China and Europe. Also, the company has been booking strong accessory revenues lately, and this is anticipated to boost the top line in the quarter under review as well.

GoPro’s first-quarter results were favorably impacted, backed by significant reduction in operating expenses. Interestingly, the first-quarter earnings results reflected some of the first positive developments the company has seen in several quarters. The to-be-reported quarter’s profits should also benefit from its intensive cost-cutting and restructuring measures.

GoPro’s optimism stems from its company-wide restructuring efforts, which include a combination of programs to cut costs. These comprise reduction of total workforce by 15%, shutting down the entertainment division and reduction of office space. These efforts will undoubtedly drive earnings for the quarter higher.

The company’s stock has had a dismal run on the bourse – having declined 34.3% over the past one year – in stark contrast to the industry’s average position return of 21.6%.

We believe that GoPro is well poised to capitalize on the fast-growing consumer drone market through its Karma. Karma’s success is an integral part of GoPro’s return to growth, along with the Hero5 cameras.

In light of a relatively strong first quarter, the company gave a decent guidance for second-quarter 2017. It projects revenues of about $270 million (+/- 10 million) for the quarter. The company expects gross margin to be 33.5% (+/- 1%).

However, in light of the recent positive developments at the company, some analysts have become increasingly bullish on the stock lately, with the company’s estimates moving north over the past month. The Zacks Consensus Estimate for 2017 narrowed from a loss of 50 cents to a loss of 43 cents over the past 30 days.

GoPro, Inc. Price, Consensus and EPS Surprise


Earnings Whispers

Our proven model does not conclusively show that GoPro will likely beat earnings estimates in 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. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 34 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GoPro has a Zacks Rank #3, but the company’s ESP of 0.00% reduces the chances of a positive earnings surprise.

Note that 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 That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Sempra Energy (SRE - Free Report) has an Earnings ESP of +11.25% and a Zacks Rank #2. The company is expected to release earnings results on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Galapagos NV (GLPG - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 4.

Calumet Specialty Products Partners, L.P. (CLMT - Free Report) has an Earnings ESP of +26.09% and a Zacks Rank #3. The company is likely to release earnings on Aug 4.

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