) is set to report second-quarter fiscal 2014 results on Aug 4,
after market closes. Last quarter, it posted a positive surprise of
14.3%. Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
As a student-first connected learning platform, Chegg started the
year on a strong note, beating both revenue and earnings estimates
in the first quarter of 2014. The company has been benefiting from
the introduction of new products and expansion of its services to
students. This trend is expected to continue in the second quarter.
The company expects second quarter revenues in the range of $61
million to $65 million. Digital revenue is expected to represent
30% to 31% of total revenue. Gross margin is expected to be about
36%. Adjusted EBITDA is expected to range between $(2) million and
California-based Chegg expects fiscal 2014 revenue to range between
$310 million and $320 million. Digital revenue is expected to
represent 28% to 30% of total revenue. Margin is expected to range
between 27% and 29%. Adjusted EBITDA is expected to range between
($10) million and $5 million.
However, the company has been incurring losses for the last two
quarters, a trend which is likely to continue in the upcoming
Our proven model does not conclusively show that Chegg is likely to
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is
not the case here, as you will see below.
Earnings ESP for Chegg is 0.00%.
Chegg's Zacks Rank #3 (Hold) 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.
Other Stocks to Consider
Here are some other companies in the service sector that can be
considered as our model shows that they have the right combination
of elements to post an earnings beat this quarter:
Constant Contact, Inc. (
), Earnings ESP of +4.8% and a Zacks Rank #2 (Buy).
United Rentals, Inc. (
), Earnings ESP of +2.4% and a Zacks Rank #2.
DTS Inc. (
), Earnings ESP of +66.7% and a Zacks Rank #3.
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