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eBay's (EBAY) 1st Earnings without PayPal: What's in Store?

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We expect eBay Inc.EBAY to beat expectations when it reports third-quarter 2015 results on Oct 21.

Why a Likely Positive Surprise?

Our proven model shows that eBay is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.03%. This is very meaningful and a leading indicator of a likely earnings surprise.

Zacks Rank: eBay has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of eBay's Zacks Rank #3 and +3.03% ESP makes us very confident in looking for an earnings beat.

What is Driving the Better-than-Expected Earnings?

eBay's online marketplace sells millions of items across thousands of categories. The company is offering retailers various kinds of tools to build an effective online business, which in turn, will help it to gain from the changing ways in which consumers shop.

eBay's shares gained 3.4% in anticipation of strong second-quarter results and investors weren't disappointed. While Fx continued to play spoil sport, the company managed to beat the Zacks Consensus Estimate by 5 cents or 8.6%.

Management closed the sale of the Enterprise unit and classified the business as discontinued operations in the last quarter. Now, the company focuses only on its core marketplaces operations, having sold off Enterprise and spun off PayPal, which should drive results in the third quarter.

eBay seeks to attract more customers to its online properties, engage them and thus generate revenues.

Also, eBay is currently focused on rightsizing its business. The company plans to cut 2,400 jobs or 7% of the workforce across its operating segments. This job cut will lower operational costs and create competitive cost structures. We believe that a leaner cost structure will boost eBay's margins and earnings growth in the to-be-reported quarter.

Other Stocks to Consider

eBay is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three companies:

Amgen Inc. AMGN , with an Earnings ESP of +2.11% and a Zacks Rank #1.

Anika Therapeutics Inc. ANIK , with an Earnings ESP of +2.94% and a Zacks Rank #1.

SkyWest Inc. SKYW , with an Earnings ESP of +4.55% and a Zacks Rank #1.

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EBAY INC (EBAY): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

SKYWEST INC (SKYW): Free Stock Analysis Report

ANIKA THERAPEUT (ANIK): 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.


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

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