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Groupon (GRPN) Gears Up for Q4 Earnings: What to Expect?

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Groupon’s GRPN fourth-quarter 2019 results are likely to have benefited from initiatives to make website consumer friendly with more voucher less and real-time bookable utility deals.

Notably, in the third-quarter earnings conference, management anticipated positive contribution from incremental adoption of latest products, including Groupon Select, Universal Cart and Guest Checkout products to drive fourth-quarter performance.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 17 cents per share, which declined 5.6% over the past 30 days. Notably, the figure indicates an improvement of 70% from the prior-year quarter.

For revenues, the consensus mark stands at $692.18 million, suggesting a decline of 13.5% from the year-ago reported figure.

Factors Likely to Have Influenced Q4 Results

Groupon’s evolving voucherless strategy intends to provide customers with enhanced experience and increased conversion across the United States. The company is also focused on initiatives to bolster card linked offers, and improve mobile experience and real-time bookability. These initiatives are expected to have driven North America local gross billings in the fourth quarter.

Notably, the Zacks Consensus Estimate for North America local gross billings currently stands at $522 million, indicating an improvement from $511.2 million reported in the third quarter.

Groupon, Inc. Price and EPS Surprise

Groupon, Inc. Price and EPS Surprise

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

The latest deals with MINDBODY, GasBuddy, Prodege and DerbySoft underscore the company’s focus to fortify marketplace with experience-based lucrative local deals. This is expected to have aided Groupon in strengthening presence in North America in the fourth-quarter. This, in turn, is expected to have aided the fourth-quarter performance.

Additionally, partnerships with Grubhub, ParkWhiz, among others, and ongoing brand awareness programs are expected to have revived the declining active customers count. Thereby, these deals are expected to have favored the fourth-quarter financial performance.

Notably, as of Sep 30, 2019, the company had approximately 27.7 million active customers based in North America.

The daily deals website company has also acquired Presence AI to gain AI-driven voice and text communications tool capabilities. This is expected to have expanded Groupon’s user base in the fourth quarter, on the back of enhanced product features with new booking functionalities and enriched user experience.

Moreover, incremental adoption of Groupon Select membership program (for a monthly subscription of $4.99), is expected to have positively impacted top-line in the fourth quarter.

Markedly, Groupon has been trying to reduce dependence on goods deals and is shifting focus toward local services market of late. This transition to high margined local services market has been hurting the company’s revenues.

Further, increasing investments on acquisitions and product enhancements is likely to have limited margin expansion in the fourth quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Groupon this time around. 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.

Groupon has an Earnings ESP of 0.00% and a Zacks Rank #3. 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.

Alteryx, Inc. AYX has an Earnings ESP of +6.49% and a Zacks Rank #1. You can see  the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, Inc. AMAT has an Earnings ESP of +2.89% and a Zacks Rank of 1.

Five9, Inc. FIVN has an Earnings ESP of +1.02% and a Zacks Rank of 2.

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