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Groupon (GRPN) to Report Q4 Earnings: What's in the Cards?

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Groupon Inc. (GRPN - Free Report) is set to release fourth-quarter 2018 results on Feb 12. Notably, the company missed estimates in two of the trailing four quarters, recording average negative surprise of 7.4%.

Groupon reported mixed third-quarter 2018 results. The company delivered non-GAAP earnings of 4 cents per share, which beat the Zacks Consensus Estimate by a penny. Further, the figure increased from 1 cent reported in the year-ago period.

Revenues of $592.9 million declined 7% on a year-over-year basis (6% at FX neutral), lagging the Zacks Consensus Estimate of $603 million. The year-over-year decline can primarily be attributed to lower customer traffic.

What to Expect?

For the fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $785.1 million, reflecting year-over-year decline of 10.1%.

However, the Zacks Consensus Estimate for earnings is pegged at 13 cents per share, reflecting year-over-year increase of 85.7%.

Let's discuss the factors likely to influence fourth-quarter results.

Groupon, Inc. Price and EPS Surprise

 

Groupon, Inc. Price and EPS Surprise | Groupon, Inc. Quote

Factors at Play

Management noted that its new offering Groupon+ is being well received as the company is enhancing customer experience by investing in voucherless initiatives. During the last reported quarter, the company had around 5.9 million cards linked in Groupon+. This is expected to be a catalyst going ahead.

The company’s partnership with Grubhub allows customers to order food delivery from more than 80,000 restaurant partners of Grubhub via Groupon platform.

Further, partnerships with CoreSource, American Express, Major League Baseball, among others are aiding Groupon to cater to just about any local need, consequently aiding it to rapidly penetrate the market.

The company recently, entered into an extended strategic relationship with MLBAM’s privately owned subsidiary, Tickets.com. Per the partnership, Groupon will be able to furnish robust ticketing experiences to major ticketing clients of Tickets.com.

Further, Groupon raised the bar of its marketplace platform with the recent distribution partnership agreement with AMC Entertainment Holdings, Inc. Groupon is anticipated to boost its North America customer base considerably with the new alliance, in turn bolstering the top line. In fact, the company had approximately 31.4 million active customers based in North America compared with 32.2 million at the end of the previous quarter, as of Sep 30, 2018. With a proper mix of products and accelerating consumer activities, management anticipates growth going forward.

However, Groupon has been trying to reduce its dependence on goods deals and is shifting focus toward local services market of late. This is because the local services market is a high margin business while goods deals bring in high revenues but smaller margins. The transition is hurting the company’s revenues and is anticipated to remain a drag in the to-be-reported as well.

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.

Groupon currently has a Zacks Rank #2 and an Earnings ESP of 0.00%. Please insert the Zacks ESP Filter.

Stocks with Favorable Combination

Here are some stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Portland General Electric Company (POR - Free Report) has an Earnings ESP of +4.19% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals Incorporated (VRTX - Free Report) has an Earnings ESP of +1.43% and a Zacks Rank #3.

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Groupon, Inc. (GRPN) - free report >>

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