Zillow's (ZG) Q3 Earnings To Benefit From Increasing Traffic

Zillow Group Inc. (NASDAQ:ZG) is set to report third-quarter 2017 earnings on Nov 7. We expect the company to benefit from increasing traffic at its mobile apps and websites, strong rental demand and expanding Multiple Listing Services (MLS) partnerships.

The company beat the Zack Consensus Estimate in three of the trailing four quarters, with an average positive earnings surprise of 59.35%. Last quarter, Zillow reported earnings of 4 cents, which was better than the Zacks Consensus Estimate of a breakeven.

Moreover, the company surpassed the Zacks Consensus Estimate for revenues in the trailing four quarters.

Zillow expects total revenues in the range of $273-$278 million. The consensus estimate is currently pegged at $277 million.

Notably, Zillow’s shares have returned 8.8%, significantly underperforming the industry’s 31.8% rally.

Let's see how things are shaping up for this announcement.

Key Factors to Impact Results

Zillow’s increased advertising effectiveness, continuous product innovation and effective free marketing channels are helping it gain audience. Traffic to Zillow Group brands mobile apps and websites increased 6% year over year to reach more than 178 million average monthly unique users in the last quarter. The increased traffic drove Premier Agent business revenues.

Notably, the new auction-based pricing model in the Premier Agent business has gained significant traction within a short span of time. This is expected to boost the top-line growth in the soon-to-be-reported quarter.

Moreover, Zillow’s expanding MLS partnerships is aiding the company to deliver high-quality listing information to home buyers and sellers. Additionally, the company is well poised to gain from rapidly-growing rental traffic.

Nevertheless, stiff competition, increasing mortgage interest rates and higher advertising spend are major headwinds.

Earnings Whisper

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

Zacks ESP: Zillow Group’s Earnings ESP is -19.2%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Zillow carries a Zacks Rank #3, which when combined with -1.92% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some stocks that you may consider as our proven model shows that they have the right combination of elements to post an earnings beat this quarter.

NVIDIA Corporation (NASDAQ:NVDA) has an Earnings ESP of +0.71% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Adobe Systems Inc. (NASDAQ:ADBE) has an Earnings ESP of +0.25% and flaunts a Zacks Rank #1.

Micron Technology Inc. (NASDAQ:MU) has an Earnings ESP of +1.51% and sports a Zacks Rank #1.

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