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Square (SQ) Q3 Earnings to Reflect Strong Seller Growth

Payment and point-of-sale (POS) services provider Square, Inc. SQ will report its third-quarter 2017 results on Nov 8 after the bell.

We expect the company to perform better in terms of both the top and the bottom line on a year-over-year basis. Year to date, the stock has rallied an impressive 170.7%, significantly outperforming its industry’s 30.2% gain.

Large Sellers and Product Usage to Drive Revenues

The top line is expected to strengthen driven by increase in larger sellers and product usage through cross selling. The Zacks Consensus Estimate for revenues for the to-be-reported quarter is pegged at 574 million. In the last reported quarter, revenues came in at $552 million, up 25.8% on a year-over-year basis.

Square, Inc. Price and EPS Surprise

Strong Top Line and Operating Leverage to Drive Bottom Line

Again, strong top-line growth along with ongoing operating leverage and lower risk loss rates are likely to drive the bottom line. The Zacks Consensus Estimate for earnings for the to-be-reported quarter stands at 6 cents per share. Last quarter, the company reported a loss of 4 cents per share, narrower than a loss of 8 cents per share in the year-ago quarter.

GPV to Surge on Larger and Midmarket Seller Growth

Gross Payment Volume (GPV) is anticipated to increase driven by growth in both larger as well as midmarket sellers. Square defines larger sellers as those who make more than $125,000 of annualized GPV and midmarket sellers as those who make more than $500,000 of annualized revenues. The consensus mark for the to-be-reported quarter stands at 17.1 billion.  In the last reported quarter, the company processed $16.4 billion of GPV that increased 32% year over year.

What Our Model Suggests

Please note that according to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided, especially if these have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Square has a Zacks Rank #2 and an Earnings ESP of -13.33%, a combination that suggests that the company is unlikely to beat estimates.

Stocks to Consider

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:

NVIDIA Corp. NVDA, with an Earnings ESP of +1.60% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated TXN with an Earnings ESP of +0.42% and a Zacks Rank #1.

Adobe Systems Incorporated ADBE with an Earnings ESP of +0.25% and a Zacks Rank #1.

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Square, Inc. (SQ): Free Stock Analysis Report
Adobe Systems Incorporated (ADBE): Free Stock Analysis Report
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
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