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Facebook (FB) Stock Climbs 1.78% Ahead of Earnings: What To Watch

Shares of Facebook FB touched a new all-time high Tuesday one day before it is set to report its second-quarter financial results. So let's take a look at what investors should expect from Facebook after the closing bell Wednesday.

Facebook has seen its stock price climb over 21% since the start of the year despite its data-scandal selloff. Plus, the firm's daily and monthly active user figures have remained strong, with both its MAUs and DAUs up 13% last quarter. Meanwhile, Facebook's photo-sharing app Instagram recently hit 1 billion MAUs, which tops Snapchat SNAP and Twitter's TWTR combined user totals (also read: Should You Buy Facebook Stock Ahead of Q2 Earnings? ).

Our current Zacks Consensus Estimate is calling for Facebook's Q2 revenues to touch $13.43 billion, which would mark a 44% climb from the year-ago quarter. Meanwhile, FB's adjusted quarterly earnings are projected to pop by 32.6% to reach $1.75 per share.

Investors should also note that Facebook has received five earnings estimate revisions for Q2 over the last 30 days, with 100% agreement to the upside. FB's strong positive earnings trend has contributed to its Zacks Rank #2 (Buy).

With all that said, we still need to gauge how likely the firm is to outperform its earnings estimate, and we can turn to our exclusive Earnings ESP figure to do so.

Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Facebook's Most Accurate Estimate-the representation of the most recent analyst sentiment-is calling for earnings of $1.74 per share, which is one cent worse than our current consensus estimate. FB also currently sports an Earnings ESP of -0.64% and a Zacks Rank #2 (Buy), which means our model is inconclusive.

With that said, Facebook has topped our estimates over the trailing 11 periods. We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report, and FB has popped in eight out of these last 11 windows-including a 9.6% surge last quarter and a 3.2% climb in Q4.

Make sure to check back here for our full analysis after Facebook reports!

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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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