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Twilio (TWLO) to Report Q3 Earnings: What's in the Cards?

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Twilio Inc. (TWLO - Free Report) is slated to release third-quarter 2018 results on Nov 6.

Notably, Twilio has a positive record of earnings surprises in the trailing four quarters, with the average surprise being 60.72%. In the second quarter, the company reported earnings of of 3 cents per share against the Zacks Consensus Estimate of a loss of 6 cents per share. The company had reported loss of 5 cents in the year-ago quarter.

The company’s second-quarter revenues surged 54% year over year to $147.8 million and surpassed the Zacks Consensus Estimate of $130 million.

For third-quarter 2018, Twilio expects revenues to be between $150 million and $152 million. Non-GAAP earnings are projected in the range of 2-3 cents per share.

The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $151.4 million, which reflects year-over-year growth of almost 50.6%. Moreover, the consensus mark for earnings has been steady at 2 cents per share over the past 60 days.

Factors at Play

Twilio is benefiting from robust adoption of CPaaS (communications platform as a service) solutions by global enterprises. The company is gaining not only from solid expansion within existing customers but also first-time deals with new ones, which resulted from the company’s continued focus on introducing products as well as its go-to-market sales strategy.

The company’s key initiatives, including product innovation, global expansion and acquisitions, are helping it gain customers. Solid growth in the company’s core voice and messaging products is a key driver.

Moreover, positive response to Twilio Flex,the company’s cloud contact center solution launched in March, gave further impetus to the company’s Engagement Cloud platform. Notably, Flex is gaining solid traction against legacy on-premise vendors like Cisco (CSCO - Free Report) and Avaya.

Moreover, Uber’s contribution to Twilio’s revenues, which began to decrease in the last few quarters, is showing signs of stabilization.

However, the company is exposed to significant international risk as it derives a significant portion of revenues from customers outside the United States. Foreign currency fluctuations and macroeconomic risk therefore remains a key threat.

Also, intensifying competition in the communications market and growing prevalence of in-app push notifications are major concerns. Apart from this, customer concentration remains a headwind.

Twilio Inc. Price and EPS Surprise

Twilio Inc. Price and EPS Surprise | Twilio Inc. Quote

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. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Twillio currently carries a Zacks Rank #3 and has an Earnings ESP of -13.33%.

Stocks to Consider

Here are a couple of stocks that you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Adobe Systems Incorporated (ADBE - Free Report) with an Earnings ESP of +0.19%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five9, Inc. (FIVN - Free Report) with an Earnings ESP of +5.88% and a Zacks Rank #3.

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