GrubHub Inc. (GRUB) is set to report third-quarter fiscal 2014 results on Oct 23. In the previous quarter, the company reported earnings of 3 cents per share, which missedthe Zacks Consensus Estimate by a penny.
Let’s see how things are shaping up for this quarter.
Growth Factors in the Past Quarter
GrubHub’s increasing commission rate is a key positive. The company primarily targets independent restaurants, which account for 61% of all the U.S. dining places. Per the company, Americans spend approximately $67 billion on take-outs at these independent eateries, which is expected to increase rapidly.
Moreover, we believe that increasing mobile engagement will drive the top line in fiscal 2014 and beyond. Approximately 48% orders were placed through mobile in the second quarter compared with 39% in the year-ago quarter.
Nevertheless, intensifying competition from the likes of Amazon.com (AMZN) will be a major headwind, in our view.
Earnings Whispers?
Our proven model does not conclusively show that GrubHub is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Zacks ESP: GrubHub currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at earnings of 4 cents per share.
Zacks Rank: GrubHub has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Facebook (FB), with an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).
InvenSense (INVN), with an Earnings ESP of +10.00% and a Zacks Rank #2.
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