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GoPro (GPRO) to Report Q2 Earnings: What's in the Cards?

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GoPro, Inc. (GPRO - Free Report) is scheduled to report second-quarter 2018 financial results after the closing bell on Aug 2. In the last reported quarter, the company delivered a positive earnings surprise of 15%.

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

Factors to Consider

During the second quarter, GoPro achieved the milestone of more than 30 million HERO cameras sale since the debut of its first HD model in November 2009. Its cameras have been the best-selling device in its category for the past 17 quarters in a row in North America.

For the to-be-reported quarter, management expects revenues to be in the range of $260 million to $280 million, driven by the demand for HERO5 and HERO6 Black cameras as well as entry-level HERO cameras. While gross margin percentage is anticipated to be in the upper-20s, operating expenses are expected to be slightly above $100 million, up sequentially, primarily due to higher advertising costs. Non-GAAP tax expenses are likely to be $0.5 million. The company expects cash balances to increase in the second quarter resulting from lower losses and improvements in working capital.

However, for the second quarter, the Zacks Consensus Estimate for total revenues stands at $272 million, down from $297 million reported in the year-earlier quarter, due to a price-competitive camera and camcorder market.

Earnings Whispers

Our proven model does not conclusively show that GoPro is likely to beat earnings this quarter as it does not possess one of the two key components. 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 exactly not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, as both are pegged at a loss of 22 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

GoPro, Inc. Price and EPS Surprise

Zacks Rank: GoPro currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes earnings prediction difficult.

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

Stocks to Consider

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:

Domtar Corporation (UFS - Free Report) has an Earnings ESP of +1.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NMI Holdings, Inc. (NMIH - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #1.  

Hilton Grand Vacations Inc. (HGV - Free Report) has an Earnings ESP of +11.36% and a Zacks Rank #2.

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