Twilio (TWLO) to Report Q3 Earnings: What's in the Cards?

Twilio Inc. TWLO is set to report third-quarter 2019 results on Oct 30.

For the quarter, the company expects revenues in the range of $286-$289 million. The Zacks Consensus Estimate is pegged at $287.6 million, indicating a 70.3% rise from the prior-year reported figure.

The company expects non-GAAP earnings per share to be 1-2 cents. The consensus estimate for earnings stands at a penny per share, suggesting 85.7% decline from the year-ago reported number.

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average positive surprise being 175%.

In the last reported quarter, Twilio’s non-GAAP earnings came in at 3 cents per share, which surpassed the Zacks Consensus Estimate of 2 cents, but remained flat year over year.

The company generated revenues of $275 million, surging 86% from the year-earlier quarter. It also outpaced the consensus estimate of $260 million, driven by growth in its core products. Moreover, the acquisition of SendGrid, completed in February, was also a key driver.

Twilio Inc. Price and EPS Surprise

Twilio Inc. Price and EPS Surprise

Twilio Inc. price-eps-surprise | Twilio Inc. Quote

Factors at Play

Twilio third-quarter earnings are likely to have been driven by strong customer growth and expansion rates. The company’s core voice and messaging products as well as the recent addition of email are also expected to have been tailwinds.

Moreover, growing number of Twilio Flex deals are anticipated to have provided an added impetus to the company’s third-quarter revenues.

Twilio’s focus and investments to meet the requirements of global enterprises continue to reap benefits. The company’s commendable efforts toward expanding its global footprint is expected to be reflected in its third-quarter results. The company is making strategic alliances and employing more employees outside the U.S. office to enhance international operations. In the third quarter, the company announced new partnerships with seven local consulting firms in Japan to widen its presence in the country.

Additionally, the SendGrid buyout, which had a favorable impact on the top and the bottom line in the last reported quarter, is expected to have remained accretive in the third quarter as well.
Further, with new products gaining traction, dollar-based net expansion rate, which was 140% in the last reported quarter, might have continued to be a major revenue driver in the to-be-reported quarter.

However, delay and uncertainty around the exact timing of the implementation of Verizon’s A2P fee prompted the company to remove any expected revenue benefit for third quarter.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Twilio this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Twilio carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Dell Technologies DELL has an Earnings ESP of +0.78% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Science Applications International SAIC has an Earnings ESP of +0.75% and is Zacks #3 Ranked.

DHI Group DHX has an Earnings ESP of +9.09% and a Zacks Rank of 3.

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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.

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