Groupon, Inc. GRPN is set to release third-quarter 2015 earnings results on Nov 3. In the last quarter, the company reported a negative earnings surprise of 50.0%. The company delivered positive earnings surprises in three of the last four quarters, with an average positive earnings surprise of 56.25%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Rising e-commerce spending on mobile devices, a profitable domestic market and an underpenetrated international market are among the primary growth drivers for Groupon.
We believe that the company's business model that focuses on discounts and deals to drive sales is likely to attract many consumers, especially during the holiday season. Also, the company's strategy of offering special deals prior to important events like Thanksgiving enhances its popularity. We expect these opportunities to continue to drive top-line growth.
Moreover, increased traction in the mobile business, driven by the increasing adaptability of smartphones and tablets, is another positive for the company.
However, the company continues to face significant competition not only from giants like eBay EBAY and Amazon.com AMZN but also from small companies like LiveDeal, which is a major near-term headwind. Growing competition is expected to keep Groupon's pricing under tremendous pressure in the near term. Furthermore, it reduces the company's bargaining power with the merchants as they can move to other deal providers.
Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 4 cents per share.
Zacks Rank: Groupon carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here is a stock you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Facebook, Inc. FB , with an Earnings ESP of +5.71% and a Zacks Rank #1 (Strong Buy).
Nexstar Broadcasting Group, Inc. NXST , with an Earnings ESP of +14.29% and a Zacks Rank #2 (Buy).
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