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What's in the Cards for Web.com (WEB) in Q1 Earnings?

Web.com Group, Inc. WEB is slated to report first-quarter 2016 results on May 5. In the last reported quarter, Web.com recorded a positive earnings surprise of 13.21%. Moreover, the company has an average positive surprise of 9.54%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Web.com is a leading provider of online marketing for small businesses. Web.com’s strength in domain businesses and value added solutions will boost its revenues. Also, its ability to provide economical and high touch service to help small businesses succeed online helps Web.com have a competitive advantage. Therefore, the company’s focus on adding higher quality subs in its value added services portfolio will drive revenue growth and profitability in the to-be reported quarter. The company’s subscriber base totals 3.4 million.

Plus, in Mar 2016, the company completed the acquisition of Yodle, a leading provider of cloud value added solutions. The company has over 58K subscribers including 900 franchise customers and generated over $208 million in revenues last year with a high ARUP of $300 per month. Web.com expects synergies from the acquisition to be $30 million for the first year.

Including Yodle, management expects non-GAAP revenues in a range of $150.5 million to $153.5 million for the first quarter of 2016. Adjusted EBITDA margin is expected to be 26% while non GAAP earnings per share are expected to be in a range of 59 cents to 63 cents.

Earnings Whispers

Our proven model does not conclusively show that Web.com will beat estimates 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: Web.com has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents.

Zacks Rank: Web.com carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise

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.

Stocks to Consider

Here are some companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

ACI Worldwide, Inc. ACIW has an Earnings ESP of +12.50% and a Zacks Rank #3.

Ctrip.com International Ltd. CTRP has an Earnings ESP of +11.43% and a Zacks Rank #3.

Agilent Technologies, Inc. A has an Earnings ESP of +2.56% and a Zacks Rank #3.


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CTRIP.COM INTL (CTRP): Free Stock Analysis Report
 
ACI WORLDWIDE (ACIW): Free Stock Analysis Report
 
AGILENT TECH (A): Free Stock Analysis Report
 
WEB.COM GROUP (WEB): Free Stock Analysis Report
 
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