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Is a Beat in the Cards for HubSpot (HUBS) in Q1 Earnings?


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HubSpot, Inc. HUBS is scheduled to report first-quarter 2018 results on May 10. The company has witnessed a remarkable streak of beating earnings estimates. In fact, HubSpot surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive earnings surprise of 208.48%.

In fourth-quarter 2017, the company reported adjusted earnings of 12 cents per share against a loss of 13 cents per share in the year-ago quarter.

Moreover, revenues of $106.5 million increased 39% year over year. The figure surpassed the Zacks Consensus Estimate of $101 million as well as management's guided range of $101-$102 million.

Favorable ESP

Per the Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive  Earnings ESP  has good chances of beating estimates.

The Sell-rated stocks (4 or 5) are best avoided, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

HubSpot has a Zacks Rank #3 and an Earnings ESP of +5.60%, which raises confidence about a possible earnings surprise.

Notably, the company's stock has gained 25.9% year to date, substantially outperforming the 4.9% rally of the industry it belongs to.



What to Expect?

HubSpot expects non-GAAP operating income in the range of $4-$5 million for the to-be-reported quarter. Moreover, non-GAAP earnings are anticipated between 10 cents and 12 cents per share. HubSpot forecasts revenues in the range of $109.2-$110.2 million for first-quarter 2018.

The Zacks Consensus Estimate is currently pegged at 11 cents per share. We note that the Zacks Consensus Estimate has remained unchanged over the past 30 days. Additionally, analysts polled by Zacks project revenues of roughly $109.8 million, up approximately 33.5% from the year-ago quarter. Both earnings and revenues are in-line with mid-point of the manangement's guided range.

Further, the Zacks Consensus Estimate for Professional Services and Other segment revenues is $5.27 million, while that of Subscription revenues is $105 million.

Focus on SMB: Key Catalyst

HubSpot has been striving to gain adoption by the small and medium business ("SMB") space, where the companies are increasingly trying to digitally transform their ways of marketing. The freemium model of HubSpot is tailor-made for SMB users.

During the quarter, HubSpot announced that the company will adopt Google Cloud in order to strengthen its international cloud infrastructure. The extended partnership with Google will help it rapidly penetrate the SMB market in Europe.

The partnership will provide enhanced data security, speed and reliability to HubSpot's platform, which will expand customer base, eventually driving top-line growth. Moreover, adoption of Google cloud is anticipated to lower costs, which is likely to boost profitability. Additionally, the partnership will enable the company to invest more in its ongoing Google Cloud product integrations.

Other Factors to Consider

Hubspot's inbound marketing and sales software suite is gaining wide acceptance. In the last reported quarter, total customers increased 48% year over year to 41,593. Moreover, the rapid adoption of One Hubspot and Hubspot CRM tools are likely to boost top-line growth. It may be noted that the Zacks Consensus Estimate for total customers is pegged at 44,505 for the soon-to-be reported quarter.

Management is also optimistic about the launch of Customer Hub scheduled in 2018. Customer Hub will support HubSpot's inbound software suite and strengthen its clientele by transforming their customers into promoters.

Additionally, the acquisitions of Motion AI and Kemvi reflect the company's focus on integrating artificial intelligence ("AI") in its offerings, as well as expanding its solutions portfolio.

HubSpot, Inc. Price and EPS Surprise

HubSpot, Inc. Price and EPS Surprise | HubSpot, Inc. Quote

Moreover, integration with Shopify SHOP and Facebook is expected to be a catalyst. Content Strategy, a tool to optimize search engine optimization ("SEO") technique, is a positive for the company's product suite and top-line.

Other Stocks That Warrant a Look

Here are a couple of stocks worth considering as our model shows that these, too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Yelp Inc. YELP and The Trade Desk Inc. TTD , both carrying a Zacks Rank #3, have an Earnings ESP of +18.45% and +11.87%, respectively. You can see the complete list of today's Zacks #1 Rank stocks here .

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HubSpot, Inc. (HUBS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: YELP , SHOP , TTD , HUBS


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