Groupon Inc. (GRPN) is set to report first-quarter 2014 results on May 6, 2014. The company has posted an average negative earnings surprise of 311.1% over the past four quarters. Year-to-date, Groupon’s share price has plunged 40.2% compared with 2.7% increase in the S&P 500.
Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Groupon is well positioned to gain from the rising e-Commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. Moreover, increased traction in the mobile business is another positive for the company.
For the first quarter of 2014, Groupon forecasts revenues in the range of $710.0 to $760.0 million, which includes $50.0 million revenue contribution from the acquired businesses of Ticket Monster and Ideeli, completed in Jan 2014. The Zacks Consensus Estimate for revenues is currently pegged at $741.0 million.
Both the acquisitions are expected to negatively impact adjusted EBITDA by $20.0 million. Groupon expects EBITDA in the range of $20.0 to $40.0 million for the quarter. Management also stated that marketing expenses will increase approximately $25.0 million.
Groupon expects to report loss of 4 cents to 2 cents for the first quarter of 2014. However, this guidance is narrower than the Zacks Consensus Estimate of a loss of 7 cents.
We note that in North America, the company continues to face significant competition not only from stalwarts like eBay (EBAY) and Amazon (AMZN) but also from small companies like LiveDeal (LIVE), which is a major headwind 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 of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents. Hence, the difference is 0.00%.
Zacks Rank: Groupon’s Zacks Rank #3 (Hold) when combined with 0.00% Earnings ESP makes surprise prediction difficult.
We caution against stocks with Zack #4 and 5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment