GoDaddy Inc. GDDY is slated to report third-quarter 2015 results on Nov 4. Last quarter, the company posted a negative earnings surprise of 41.18%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
GoDaddy’s second-quarter 2015 adjusted loss of 46 cents per share were wider than the Zacks Consensus Estimate of a loss of 17 cents. However, revenues of $394.5 million beat the Zacks Consensus Estimate of $393.0 million, backed by balanced growth in customers and average revenue per user (ARPU).
Investments in products, technology platform and customer care as well as delivering innovative and increasingly personalized products and services globally should boost results in the third quarter.
It is, however, worth noting that GoDaddy has not recorded any profits to date. In 2014, the company’s revenues rose 23% to $1.4 billion but could cover the costs, resulting in a net loss of $143.3 million. This does not speak well of a mature, 18-year-old company. The company has highlighted its cash flow from operations, blaming the losses on accounting rules that require it to defer reporting some subscription revenues.
For the third quarter, the company expects revenues in the range of $405–$410 million. The Zacks Consensus Estimate is pegged at $408 million.
Earnings Whispers
Our proven model does not conclusively show that GoDaddy is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. 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: GoDaddy’s Earnings ESP is -22.22%. This is because the Most Accurate estimate stands at a loss of 11 cents, while the Zacks Consensus Estimate is pegged at a loss of 9 cents.
Zacks Rank: GoDaddy’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution 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.
Stocks that Warrant a Look
Here are some companies that you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
AMC Networks Inc. AMCX with an Earnings ESP of +2.30% and a Zacks Rank #1.
Agilent Technologies Inc. A with an Earnings ESP of +2.13% and a Zacks Rank #2.
CyberArk Software, Ltd. CYBR, with an Earnings ESP of +10.00% and a Zacks Rank #2.
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