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Groupon (GRPN) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research
Updated

Groupon Inc. GRPN is set to release second-quarter 2018 results on Aug 1.

In the last reported quarter, the company’s non-GAAP earnings of 3 cents per share surpassed the Zacks Consensus Estimate of a breakeven.

Revenues of $626.5 million declined 7% on a year-over-year basis (11% at FX neutral) but outpaced the Zacks Consensus Estimate of $605 million.

For the second quarter, the company expects revenues to be in the range of $630 million to $640 million. Gross profit is expected to be around $325 million.

For full year 2018, Groupon raised its adjusted EBITDA guidance. The company now expects adjusted EBITDA to be in the range of $280 million to $290 million (previously $260-$270 million).

Let's discuss the factors likely to influence second-quarter results.

Factors at Play

Groupon is benefiting from continued focus on execution of its product, supply, and marketing initiatives. The company’s favorable mix of products along with accelerating consumer activities holds promise.

During the last reported quarter, the company continued to add new customers in North America. The company had approximately 32.6 million active customers globally as of Mar 31, 2018.

We note that Groupon’s partnership with Grubhub and ParkWhiz along with ongoing brand awareness programs is helping it expand its clientele and boost the top line.

Additionally, Groupon is rapidly penetrating the market owing to its collaborations with Gold Star, Expedia, Live Nation, Viator and Fanxchange, which are helping the company to cater to just about any local need. The company’s acquisition of Vouchercloud is also anticipated to help it boost the international coupon business.

Moreover, investments in voucher less initiatives to enhance customer experience are leading to strong adoption of its new offering, Groupon+. Integration with American Express is a key driver in this regard.

However, of late, Groupon has been trying to reduce its dependence on goods deals and is shifting focus toward local services market. This is because the 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 and is anticipated to remain a drag this quarter as well.

The second-quarter results will also reflect the impact of the acquisition of Vouchercloud for $65 million. Increase in expenses due to GDPR remains an overhang on margins.

Groupon, Inc. Price and EPS Surprise

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

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What Our Model Says
    
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Groupon currently sports a Zacks Rank #1 and has an Earnings ESP of +59.68%.

Other Stocks to Consider

Here are some stocks that you may also consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Turtle Beach HEAR with an Earnings ESP of +57.14%, and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp NTAP with an Earnings ESP of +1.12% and a Zacks Rank #2.

Avnet AVT with an Earnings ESP of +1.37% and a Zacks Rank #2.

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NetApp, Inc. (NTAP) : Free Stock Analysis Report
 
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