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Spotify (SPOT) to Post Q4 Earnings: What's in the Offing?

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Spotify Technology S.A. (SPOT - Free Report) will report fourth-quarter 2019 results on Feb 5, before the bell.

The company, which went public in April 2018, has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in three of the last four quarters, delivering positive surprise of 84.5%, on average.

Shares of Spotify have gained 2% over the past year against 7.2% decline of the industry it belongs to.

Q4 Expectations

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $2.09 billion, indicating year-over-year growth of 22.6%. Growth of subscribers and monthly active users (MAUs) is likely to have benefited the top line. However, average revenue per user (ARPU) is expected to have declined due to shifts in both product and geographic mix. Revenues increased 25% year over year in the third quarter of 2019.

Gross margin is expected to be higher due to impacts of seasonality. Notably, the metric is comparatively higher in the second and fourth quarters as costs of promotional campaigns are low compared with the first and third quarters.

The company is expected to have incurred a loss of 48 cents per share in the to-be-reported quarter. It incurred earnings of 41 cents in the third quarter of 2019 as well as in the year-ago quarter.

What Our Model Says

Our proven Zacks model does not predict an earnings beat for Spotify this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Spotify has an Earnings ESP of 0.00% and a Zacks Rank #2.

Stocks to Consider

Here are a few stocks from the broader Zacks Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings this season:

Waste Management (WM - Free Report) has an Earnings ESP of +4.19% and a Zacks Rank #2. The company is slated to report results on Feb 13. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +0.30% and a Zacks Rank #2. The company is slated to release results on Feb 13.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +1.57% and a Zacks Rank #2. The company is slated to release results on Feb 12.

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