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

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Tencent Holdings (TCEHY - Free Report) is set to report third-quarter 2019 results on Nov 13.

For the quarter, the Zacks Consensus Estimate for earnings has been steady at 38 cents per share over the past 30 days, indicating 26.7% growth from the year-ago quarter’s reported figure.

The consensus mark for revenues currently stands at $13.86 billion, implying growth of 17% from the figure reported in the year-ago quarter.

In the second quarter, the company reported non-GAAP earnings of 36 cents per share that beat the Zacks Consensus Estimate by 2.9%.

However, revenues of $12.92 billion lagged the consensus mark of $13.28 billion.
 

Tencent Holding Ltd. Price and EPS Surprise

Tencent Holding Ltd. Price and EPS Surprise

Tencent Holding Ltd. price-eps-surprise | Tencent Holding Ltd. Quote

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

Key Factors to Watch

Tencent is one of the biggest game distributors in China. The company is expected to have benefited from its dominance in the country, which is the world’s largest video game market in terms of users and revenues. However, stringent regulations are expected to have hurt the user base.

Nevertheless, continuing momentum for Honor of Kings and Perfect World Mobile is expected to have driven the top line. Further, since its launch in May, Peacekeeper Elite exceeded 50 million DAU at the end of the second quarter and the momentum most likely continued in the third quarter. The top line is expected to reflect DAU growth along with season pass offering.

Moreover, a robust gaming portfolio is a key catalyst. In July, Tencent released three smartphone games — racing game KartRider Rush, strategy game Game of Thrones: Winter is Coming and RPG Dragon Raja.

Additionally, the international user base is expected to have expanded in the to-be-reported quarter, courtesy of PUBG MOBILE and new games such as Speed Drifter and Chess Rush.

Also, growth in digital content revenues, owing to video streaming subscriptions and live broadcast services, is expected to have aided social network revenues.

Further, momentum in cloud services is expected to have continued owing to fast penetration into key sectors, including finance. This is expected to have driven FinTech and Business Services revenues in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a positive Earnings ESP along with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. But that is not the case here.

Tencent has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.63%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

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

Twin River Worldwide Holdings has an Earnings ESP of +13.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Viacom has an Earnings ESP of +13.38% and a Zacks Rank #3.

Momo (MOMO - Free Report) has an Earnings ESP of +3.94% and a Zacks Rank #3.

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