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GoPro (GPRO) to Report Q3 Earnings: Another Beat in Store?

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GoPro, Inc. (GPRO - Free Report) is slated to release third-quarter 2017 results, after the closing bell on Nov 1.

The company has had a decent earnings history, having beaten estimates thrice over the trailing four quarters, for an average positive surprise of 10.3%. Last quarter, GoPro trumped estimates by a whopping 65.4%.

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

We expect GoPro to score an earnings beat in the to-be-reported quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that GoPro has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: GoPro has an Earnings ESP of +300.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

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

Factors to Consider

GoPro’s HERO5 cameras are enjoying impressive market traction and this is likely to reflect well in 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.

We believe 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, and is likely to contribute well to this quarter’s top line.

In September, GoPro raised its outlook for the third quarter, emphasizing that it’s on track to deliver profits after a long trail of posting quarterly earnings in the red (which was broken only once over the last seven quarters). It had originally projected revenues of about $300 million (+/- 10 million) for the quarter, with gross margins of 37% (+/- 1%). However, GoPro now anticipates revenues and gross margin for the quarter to come in at the higher end of its previous guidance.

In light of several positive developments, the company’s stock has had a great turnaround on the bourse as well in the past six months — having appreciated 15.8% — outperforming the industry’s average return of 9.6%.

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.

Further, GoPro’s second-quarter results had been favorably influenced by a significant reduction in operating expenses. The to-be-reported quarter’s profits will also likely benefit from GoPro’s intensive cost-cutting and restructuring measures.

Not surprisingly, some analysts have become increasingly bullish on the stock lately, with the company’s estimates moving north sharply over the past couple of months. The Zacks Consensus Estimate for 2017 narrowed from a loss of 8 cents to a loss of 1 penny over the past 60 days, indicating positive analyst sentiment.

GoPro, Inc. Price, Consensus and EPS Surprise

 

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:

Terex Corporation (TEX - Free Report) , with an Earnings ESP of +3.17% and a Zacks Rank of 2, is expected to release quarterly numbers around Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mylan N.V. , with an Earnings ESP of +3.92% and a Zacks Rank of 2, is slated to report results on Nov 6.

Scripps Networks Interactive, Inc has an Earnings ESP of +5.10% and a Zacks Rank #3. The company is likely to release earnings around Nov 6.

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