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Chegg (CHGG) to Report Q3 Earnings: What's in the Cards?

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Chegg, Inc. (CHGG - Free Report) is set to report third-quarter 2019 results on Nov 4.

For the quarter, the company expects revenues between $88 million and $90 million. The Zacks Consensus Estimate for revenues currently stands at $89.4 million, which indicates growth of 20.4% from the year-ago quarter’s reported figure.

The consensus mark for earnings has remained at 9 cents over the past 30 days. Chegg had reported earnings of 7 cents a year ago.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 57.7%.

In the last reported quarter, Chegg reported adjusted earnings of 23 cent per share that beat the Zacks Consensus Estimate by 8 cents.

Revenues surged 27% year over year to $94 million, which also beat the consensus mark of $92 million.

Chegg, Inc. Price and EPS Surprise

 

Chegg, Inc. Price and EPS Surprise

Chegg, Inc. price-eps-surprise | Chegg, Inc. Quote

 

Key Factors to Consider

Chegg’s third-quarter results are expected to reflect an expanding customer base, thanks to increasing demand for video-based learning and self-assessment practice material.

Notably, in the last reported quarter, the company added 2.2 million new subscribers for Chegg Service, highlighting a year-over-year increase of 30%. The momentum in customer addition most likely continued in the third quarter on expanding subject matter and strong content.

Moreover, rapid adoption of Chegg Writing is expected to have benefited the company’s top line in the to-be-reported quarter.

Further, the company expects adjusted EBITDA margin to expand despite spending on growth opportunities, including initiatives to expand in international markets. Growing demand for the company’s solutions in English-speaking countries is expected to have aided top-line growth in the third quarter.  

Also, organically growing awareness of the company’s brand without significant marketing expenditure during the third quarter is expected to have driven the bottom line.

However, the company’s continued focus on investing in new technologies to build services and capabilities like video content and self-assessment practice capabilities is expected to have negatively impacted profitability in the to-be-reported quarter.

Chegg’s Thinkful Buyout Plan Bodes Well

On Sep 4, Chegg announced that it has inked a deal to acquire an online skills-based learning platform, Thinkful, Inc. The company expects to close the acquisition early in fourth-quarter 2019.

Thinkful offers cost-effective, high-quality outcome-focused professional courses with live experts’ discussion. This investment is expected to boost Chegg’s career-based skills development programs.

What Our Model Says

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of a positive earnings surprise.

Meanwhile, Chegg has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies, which, per our model, have the right combination of elements to post an earnings beat this time around:

Advanced Energy Industries (AEIS - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Meet Group, Inc. (MEET - Free Report) has an Earnings ESP of 4.17% and a Zacks Rank #2.

DHI Group, Inc. (DHX - Free Report) has an Earnings ESP of 9.09% and a Zacks Rank #3.

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