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Factors Setting the Tone for Zendesk's (ZEN) Q4 Earnings

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Zendesk is scheduled to release fourth-quarter 2019 results on Feb 6.

For the fourth quarter, the company expects revenues between $226 million and $228 million. The Zacks Consensus Estimate for revenues currently stands at $227.8 million, indicating growth of 32.2% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings stayed at 11 cents over the past 30 days, reflecting year-over-year growth of 10%.

Notably, the company’s earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, while matching once, the average positive surprise being 100%.

In the last reported quarter, Zendesk reported earnings of 12 cents per share beating the Zacks Consensus Estimate by 100%. Revenues of $210.5 million surpassed the consensus mark of $207 million.

Factors Likely to Have Influenced Q4 Results

Zendesk’s fourth-quarter results are expected to have benefited from robust adoption of Zendesk Sunshine and Zendesk Suite solutions.
 

Zendesk, Inc. Price and EPS Surprise

 

Zendesk, Inc. Price and EPS Surprise

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

Notably, Zendesk Sunshine is built on Amazon Web Services (AWS) and supports open standards. Moreover, the solution has been gaining popularity courtesy of its flexibility and developer friendliness.

Meanwhile, Zendesk Suite, an omnichannel, bundled, subscription-based product, has been gaining traction not only among small and medium businesses (SMBs) but also enterprises. At the end of the third quarter, the suite had more than 5,000 paid customers, up 1,500 sequentially.

Further, Zendesk’s endeavors to foray into large enterprises by improving product features and go-to-market capabilities are likely to have contributed to the top line. In fact, acquisition of Smooch in May 2019 is enabling the company to enhance Zendesk Sunshine with Sunshine Conversations, and roll out API connectors, including WhatsApp for Zendesk.

Notably, these factors were primarily responsible for driving the top line by 36% in the third quarter, a trend that most likely continued in the fourth quarter.

Markedly, at the end of third-quarter 2019, paid customer accounts were roughly 153,700, up 4,700 sequentially. The company’s dollar-based net expansion rate was at 116%.

However, higher investments related to packages, bundles and go-to-market efforts are expected to have affected profitability in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a 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.

Although Zendesk has a Zacks Rank #2, an Earnings ESP of 0.00% 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 stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Perion Network Ltd. (PERI - Free Report) has an Earnings ESP of +22.58% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five9, Inc. (FIVN - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #2.

Bruker Corporation (BRKR - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #2.

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