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Groupon (GRPN) Up 3.5% Since Earnings Report: Can It Continue?

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It has been more than a month since the last earnings report for Groupon, Inc. (GRPN - Free Report) . Shares have added about 3.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Groupon reported non-GAAP second-quarter 2017 earnings of $0.02 per share as compared with a loss of $0.01 in the year-ago quarter and also beat the Zacks Consensus Estimate of a break-even. The figure was also better than earnings of $0.01 per share in the previous quarter.

The sequential improvement in the bottom-line can primarily be attributed to the company’s streamlining activities.

Revenues of $662.6 million missed the Zacks Consensus Estimate of $669 million and also declined 8.4% on a year-over-year basis.

Groupon’s focus on domestic market is helping in acceleration of gross profit. The company’s North American local units continue to grow with the addition of new customers, partially offset by the departure of LivingSocial customers.

The company entered into a long-term commercial deal with Grubhub in the quarter, which is anticipated to be a growth driver going forward.

Nevertheless, the rollout of the company’s new card-linked platform, Groupon+ that replaces the voucher system and makes discounting processes easy will be a tailwind.

Revenue Details

Region-wise, North America revenues decreased 12.6% from the year-ago quarter while International revenues increased 1.9% year over year.

Billings from North America were up 0.8% year over year. However, international billings declined 7.9%.

North America local gross billings of $615.83 million grew 13.5%. Local revenues of $207.53 million grew 12.7% from the year-ago quarter. However, goods billings declined 22.8% to $245.92 million and revenues fell 28.7% to $222.06 million.

As of Jun 30, 2017, the company had approximately 48.3 million active customers globally. Groupon added nearly 300K new customers in North America during the quarter. Active customers in North America were 31.9 million at the end of the quarter.

Operating Details

Gross margin increased 590 basis points (bps) on a year-over-year basis to 49.5% in the quarter. North America gross profit increased 8%, while internationally it declined 4% (1% Fx-neutral).

Adjusted EBITDA margin expanded 310 bps to 8%, reflecting the successful implementation of the company’s streamlining strategies.

Groupon’s operating expenses (excluding one-time items) decreased 4.9% year over year to $330.84 as SG&A declined 11%.

Operating loss (excepting one-time items) was $2.77 million compared with a loss of $32.54 million in the year-ago quarter.

Balance Sheet and Cash Flow

As of Jun 31, 2017, Groupon had cash & cash equivalents worth $618.6 million compared with $691 million as of Mar 31, 2017.

During the second quarter, Groupon repurchased 7,185,453 shares of its common stock for an aggregate purchase price of $24.8 million.

Outlook

For third-quarter 2017, Groupon expects EBITDA to decline sequentially as the company plans to continue its investments in marketing and offline campaigning activities. However, EBITDA is expected to increase from the year-ago quarter figure of $36 million.

For 2017, Groupon projects gross profit to remain in the range of $1.30 billion to $1.35 billion.

Also, adjusted EBITDA is projected in the range of $215 million-$240 million, the lower end of the range being raised from $210 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Groupon, Inc. Price and Consensus

 

Groupon, Inc. Price and Consensus | Groupon, Inc. Quote

VGM Scores

Currently, Groupon's stock has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

Our style scores indicate that the stock is suitable for growth and momentum investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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