eBay Inc. EBAY is set to report its first-quarter 2015 results on Apr 22. Last quarter, the company reported a positive earnings surprise of 5.19%. It is worth noting that eBay has outperformed the Zacks Consensus Estimate in three of the four preceding quarters with an average positive earnings surprise of 1.74%.
Let's see how things are shaping up for this announcement.
Factors at Play This Quarter
eBay’s fourth-quarter earnings of 81 cents beat the Zacks Consensus Estimate of 77 cents by 5.2%. Guided earnings for the March quarter were also better than expected despite the fact that guided revenues fell short.
Management expects first-quarter 2015 revenues of $4.35-4.45 billion (down 10.6% sequentially and 3.2% year over year at the mid-point), which falls short of the Zacks Consensus Estimate of $4.70 billion. The company expects to generate GAAP EPS of 37 to 43 cents and non GAAP EPS of 68 to 71 cents. The EPS guidance is better than the Zacks Consensus Estimate of 65 cents.
eBay is currently focused on job cuts — management plans to eliminate 2,400 jobs, or 7% of the workforce across its three operating segments.
The marketplaces business has become all-important since eBay will soon be spinning off PayPal. It has already taken necessary measures to strengthen the marketplaces business, beginning with the fixed price format and moving on to wooing big sellers and customers, improving technology and navigation of its properties, investing in better fulfillment services and focusing on mobile customers. Its drive to provide complete online solutions for traditional retailers should further add to this growth.
eBay is taking all necessary measures to ensure a smooth spin-off. Last month, the company appointed two independent directors — wearable-camera maker GoPro’s GPRO President Tony Bates and the chief executive officer of American Red Cross, Gail McGovern — to the board.
According to an agreement released earlier this month, the two will continue in a partnership extending over the next six years, including a one-year transition period.
The agreement aims to keep the now independent companies alive and well on their own. However, it also forbids both eBay and PayPal from competing against each other in their main business ventures after they have gone their separate ways.
Earnings Whispers?
Our proven model does not conclusively show that eBay will beat earnings 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 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: eBay has an Earnings ESP of +3.45%. This is because the Most Accurate estimate stands at 60 cents while the Zacks Consensus Estimate is pegged lower at 58 cents.
Zacks Rank: eBay has aZacks Rank #4 (Sell). We caution particularly 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 momentum.
Other Stocks to Consider
Here are some companies which you may consider instead, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Columbia Sports Inc. COLM has an Earnings ESP of +5.71% and a Zacks Rank #1
Apple Inc. AAPL has an Earnings ESP of +2.79% and a Zacks Rank #2
Amazon.com Inc. AMZN has an Earnings ESP of +150.00% and a Zacks Rank #3
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