Groupon Inc (NASDAQ:GRPN) is set to report second-quarter 2014 results on Aug 5. Last quarter, the daily deals provider posted 42.9% positive surprise.
Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Groupon is well-positioned to gain from the rising e-Commerce spending on mobile devices, a profitable domestic market and an underpenetrated international market. We expect these opportunities to continue to drive top-line growth. Moreover, increased traction in the mobile business is an added positive for the company.
For the second quarter of 2014, Groupon forecasts revenues in the range of $725.0 million to $775.0 million. Currently, the Zacks Consensus Estimate is pegged at $761.0 million, which is on the higher end of management’s guided range.
However, stiff competition, combined with a volatile macroeconomic environment, remains the major headwind. We believe that continued investments aimed at enlarging merchant base will hurt profitability in the near term.
Earnings Whispers?
Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Groupon has a -50.00% ESP. That is because the Most Accurate estimate stands at a loss of 6 cents per share while the Zacks Consensus Estimate is lower at a loss of 4 cents.
Zacks Rank: Groupon’s Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cognizant Technology Solutions (NASDAQ:CTSH), with an Earnings ESP of +5.08% and a Zacks Rank #1 (Strong Buy).
Super Micro Computer Inc (NASDAQ:SMCI), with an Earnings ESP of +2.78% and a Zacks Rank #1.
Semiconductor Manufacturing (NYSE:SMI), with an Earnings ESP of +33.33% and a Zacks Rank #2 (Buy).