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Etsy (ETSY) Q2 Earnings Miss Estimates

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Etsy (ETSY - Free Report) just came out with quarterly earnings of $0.03 per share, missing the Zacks Consensus Estimate of $0.04 per share. This compares to earnings of $0.10 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -25%. A quarter ago, it was expected that this online crafts marketplace would post earnings of $0.05 per share when it actually produced earnings of $0.10, delivering a surprise of 100%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Etsy, which belongs to the Zacks Internet - Services industry, posted revenues of $132.39 million for the quarter ended June 2018, surpassing the Zacks Consensus Estimate by 4.66%. This compares to year-ago revenues of $101.69 million. The company has topped consensus revenue estimates four times over the last four quarters.

Total revenue was up 30.2% from the year-ago period, thanks in part to growth in both Marketplace and Services revenue. GMS for the quarter gained 20.4% to touch $901.7 million. Total operating expenses were down 4.5% to $74.2 million.

“We've made meaningful progress to enable significantly more investment in the Etsy platform, and are leveraging our strong financial position to support what we believe is a long runway for future growth,” said CFO Rachel Glaser.

Etsy now expects full-year revenue to fall in the range of $587 million to $596 million, up from previous guidance of $582 million to $591 million. This new guidance would represent growth of 33% to 35%.

As of 4:27 pm EDT, Etsy shares were up 7.2% in after-hours trading to touch $45.50.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Etsy shares have added about 103.1% since the beginning of the year versus the S&P 500's gain of 6.2%.

What's Next for Etsy?

While Etsy has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Etsy was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.10 on $149.93 million in revenues for the coming quarter and $0.46 on $588.87 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Services is currently in the top 42% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.




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