Glu Mobile (GLUU) Q2 Earnings: What's In The Cards?

Glu Mobile Inc. (NASDAQ:GLUU) is slated to release second-quarter 2017 results on Aug 1 after the closing bell. Last quarter, the company posted a negative earnings surprise of 88.89%. Moreover, it has delivered an average negative earnings surprise of 31.3% in the trailing four quarters.

However, the mobile game maker posted revenue of $56.8 million in the last reported quarter, surpassing the Zacks consensus mark of $53.6 million.

For second-quarter 2017, Glu Mobile expects bookings to be in a range of $71–$73 million. Adjusted operating expenses are expected in the range of $58.7–$59.1 million.

We note that the company’s shares have gained only 17.5% in the past year, substantially underperforming the 39% rally of the industry.

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

Factors to Consider

Glu Mobile’s roster of games, especially celebrity titles, is one of its biggest positives. Evergreen titles like Cooking Dash, Racing Rivals and Kim Kardashian: Hollywood continues to be a big contributor to revenues. Glu's acquisition of US developer Crowdstar in Nov 2016 has also been a big positive.

In the last reported quarter, the company’s significant bookings performance was driven by the remarkable growth of its social interactive interior design game Design Home, a part of the Crowdstar acquisition.

Last month, Glu Mobile signed a multi-year licensing agreement with WWE, to develop a mobile game that will be released in 2018. However, analysts observe that app store competition is fierce with three WWE mobile games already live in the market – Warner Bros.' WWE Immortals, Scopely's WWE: Champions and Take-Two's WWE SuperCard. This impacts Glu’s likelihood of generating high level of revenues from the future WWE mobile game.

Moreover, rising competition from established players like Electronic Arts (NASDAQ:EA) and Activision Blizzard (NASDAQ:ATVI) remains a concern. Furthermore, we anticipate significant investment in research and development of new game titles to be a potential headwind for the company and put pressure on margins.

Earnings Whispers

Our proven model does not conclusively show that Glu Mobile is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Glu Mobile currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 13 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Glu Mobile carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Kemet Corp. (NYSE:KEM) with an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank Stocks here.

Vishay Intertechnology, Inc. (NYSE:VSH) with an Earnings ESP of +6.06% and a Zacks Rank #1.

CGI Group, Inc. (NYSE:GIB) with an Earnings ESP of +5.71% and a Zacks Rank #2.

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