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Is a Beat in the Cards for Web.com (WEB) in Q4 Earnings?

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Web.com Group Inc. (WEB - Free Report) is scheduled to report fourth-quarter 2017 results on Feb 8.

Notably, the Internet services and online marketing solutions provider for small businesses delivered an average positive earnings surprise of 3.85% in the trailing four quarters.

Last quarter, the company delivered GAAP earnings of 16 cents per share compared with 7 cents in the year-ago quarter. 

Moreover, Web.com reported revenues of $189.8 million, slightly better than the Zacks Consensus Estimate of $189 million. However, the figure declined 1.6% on a year-over-year basis.

For fourth-quarter 2017, Web.com projects non-GAAP revenues between $188.5 million and $191.5 million. The Zacks Consensus Estimate is currently pegged at $190.8 million.
 

Web.com Group, Inc. Price and EPS Surprise

 

Web.com Group, Inc. Price and EPS Surprise | Web.com Group, Inc. Quote

 

Factors to Consider

Web.com’s top line is likely to benefit from increasing brand awareness. During the quarter, the company launched its new website that enhances customer experience.

Moreover, the company’s focus on higher-ARPU and differentiated value-added solutions are expected to drive the top line.

Retail business is expected to be strong on the back of robust demand for security and e-mail products. Management noted that post the Equifax breach, security has become imperative for small businesses to have a successful online presence. Web.com’s simple-to-use security products and consultative approach is likely to boost sales of the security products.

Moreover, the completion of the Yodle integration is likely to bolster Lead Stream and vertical market solution results.

Additionally, strong demand for real estate solution TORCHx is expected to drive conversion and retention rate, which will eventually boost total revenues. The company’s strategic partnerships with RE/MAX (one of the largest real estate brokerage franchisors) and Berkshire Hathaway HomeServices are expected to boost TORCHx’s adoption rate.

We also expect robust performance from Lighthouse 360 and Web Brand Networks (WBN) to drive quarterly results.

Notably, Web.com has been undertaking strategic acquisitions to boost operations. The company’s acquisition of Donweb.com last year and Scoot in 2014 will continue to accelerate overseas expansion.

However, an increasingly competitive business environment is a major concern. Moreover, declining subscriber base is a headwind. Web.com stated that overall retention rate may decline due to the increased mix shift towards value-added services subscribers who inherently have a higher churn rate than low-cost domain customers.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Web.com has a Zacks Rank #3 and Earnings ESP of +2.33%. Therefore, the company is likely to deliver a positive surprise this quarter.

Other Stock That Warrants a Look

Here are other stocks that you may want to consider as our model shows that they have the right combination of elements to deliver an earnings beat in their upcoming release.

NVIDIA (NVDA - Free Report) has an Earnings ESP of +4.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadridge Financial Solutions (BR - Free Report) has an Earnings ESP of +1.45% and a Zacks Rank #2.

Activision Blizzard (ATVI - Free Report) has an Earnings ESP of +4.99% and a Zacks Rank #3.

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