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Tencent (TCEHY) to Report Q3 Earnings: What's in Store?

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Tencent Holdings (TCEHY - Free Report) is set to report third-quarter 2018 results on Nov 14.

In the last reported quarter, Tencent reported earnings of 32 cents per share that missed the Zacks Consensus Estimate by a penny.

Revenues of $11.14 billion increased 30% year over year. The increase can be primarily attributed to robust performance from payment related services, digital content subscriptions and sales, social and others advertising, and smart phone games.

The Zacks Consensus Estimate for third-quarter earnings has remained steady at 28 cents over the past seven days. The consensus mark for revenues currently stands at $11.66 billion, reflecting year-over-year growth of 19.3%.

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

Key Factors to Watch For

Tencent has significant depth in its gaming portfolio that coupled with strong distribution capability is expected to drive growth. Strong adoption of new role-playing games (RPG) such as MT4 and Saint Seiya, which generates higher average revenue per user (ARPU), is expected to boost gaming revenues in the to-be-reported quarter.


Moreover, Tencent’s focus on expanding into international markets based on games like Arena of Valor and PUBG mobile is a major growth driver.

The company’s initiative to expand the capabilities and usage of Mini Programs by integrating them with digital tools like Weixin Pay is expected to boost developer and customer base. Moreover, improving user engagement level is a key catalyst.

Further, momentum in cloud services revenues is expected to continue due to fast penetration into key sectors, including finance, Smart Retail and municipal services. Additionally, strength in video advertising is noteworthy.

However, Tencent is expected to be negatively impacted by the loss of payment-related interest income due to regulations. Additionally, advertising revenues are expected to be negatively impacted by lower spending and increasing regulations key verticals like mobile gaming and web payments. A tough regulatory environment in the gaming market is expected to remain an overhang on the stock in the near term.

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.

Tencent has a Zacks Rank #5 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

NetApp (NTAP - Free Report) has an Earnings ESP of +0.83% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bitauto Holdings (BITA - Free Report) has an Earnings ESP of +12.36% and a Zacks Rank #2.

Palo Alto Networks (PANW - Free Report) has an Earnings ESP of +0.06% and a Zacks Rank #3.

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