Is Groupon (GRPN) Likely to Disappoint this Earnings Season?

Groupon Inc. GRPN is set to release its fourth-quarter 2017 results on Feb 14. The question lingering in investors’ minds is whether this daily deals website operator will be able to post a positive earnings surprise in the to-be-reported quarter. Notably, the company’s last quarter earnings were in-line with the Zacks Consensus Estimate. So, let’s see how things are shaping up prior to this announcement.

Factors to Consider

Groupon has been trying to reduce its dependence on goods deals and is shifting its focus toward local services market. This is because local services market is a high margin business while goods deals bring in high revenues but smaller margins.

The transition is hurting the company’s revenues as reflected in its third-quarter North American top-line performance, which witnessed a 14% year-over-year decline. Although the strategy will boost Groupon’s margins, we expect the strategy to negatively impact its revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for revenues from North American Goods division is pegged at $342 million for the fourth quarter, reflecting a decline of approximately 19% year over year.

Groupon, Inc. Price and EPS Surprise

Groupon, Inc. Price and EPS Surprise | Groupon, Inc. Quote

What Does Our Model Say

Our proven model does not conclusively show that Groupon 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 at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Groupon carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -13.79%. Notably, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

The Zacks Consensus Estimate for the quarter under review is pegged at 9 cents, representing year-over-year growth of 28.6%. However, analysts polled by Zacks project revenues of roughly $860.6 million, down approximately 8% from the year-ago quarter.

Stocks to Consider

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

Applied Materials, Inc. AMAT has an Earnings ESP of +0.57% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

SINA Corporation SINA has an Earnings ESP of +7.60% and a Zacks Rank #3.

HubSpot HUBS has an Earnings ESP of +1.32% and a Zacks Rank #3.

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