MINDBODY, Inc. MB is set to report third-quarter 2015 results on Nov 4. Last quarter the company reported a negative earnings surprise of 180.7%. Let us see how things are shaping up for this announcement.
Factors to Consider
MINDBODY develops cloud-based business management software and payments platform for the wellness services industry. The company currently provides its services to 42,000 businesses in over 124 countries worldwide. With such a huge client base, the company is expected to post impressive earnings numbers in the third quarter.
The company had reported encouraging second-quarter results, with the top line surpassing the Zacks Consensus Estimate. Though the company posted a loss, the reported figure was narrower than the Zacks Consensus Estimate.
MINDBODY’s gross margin for the second quarter was 64.4%, up from 57.8% reported in the year-ago quarter. The year-over-year growth in gross margin was primarily due to a higher revenue base.
Furthermore, significant investments in growth areas for improving implementation timelines, particularly for web and mobile applications products, will boost profitability going forward. This is likely to be reflected on the company’s third-quarter earnings as well.
Earnings Whispers
Our proven model does not conclusively show that MINDBODY is likely to beat the Zacks Consensus Estimate in the upcoming release. 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. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for MINDBODY is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 27 cents per share.
Zacks Rank: MINDBODY has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks with (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies, which are worth considering, as our model shows that they have the right combination of these two elements:
CDW Corporation CDW has an Earnings ESP of +2.63% and a Zacks Rank #2
CenturyLink, Inc. CTL has an Earnings ESP of +1.45% and a Zacks Rank #2
CyberArk Software, Ltd. CYBR has an Earnings ESP of +10.00% and a Zacks Rank #2
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