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What's in Store for Groupon (GRPN) This Earnings Season?

Groupon Inc. GRPN is set to release third-quarter 2017 results on Nov 1.

Last quarter, the company reported non-GAAP earnings of 2 cents per share. The reported figure was much better than non-GAAP loss per share of 4 cents in the previous quarter and also came ahead of the Zacks Consensus Estimate of break-even. The sequential improvement in the bottom line can primarily be attributed to the company’s streamlining activities.

Revenues of $662.6 million missed the Zacks Consensus Estimate of $665 million and also declined 8.4% on a year-over-year basis. The decline in the top line was mostly due to the company’s decreasing international presence.

Gross margin increased 590 basis points (bps) on a year-over-year basis to 49.5% in the quarter. Adjusted EBITDA margin expanded 310 bps to 8%, reflecting the successful implementation of the company’s streamlining strategies.

Let’s see how things are shaping up for this announcement.

Factors to Consider   

Groupon’s partnership with Grubhub GRUB in the month of July, enabling customers to order food delivery from around 55,000 restaurant partners of Grubhub via Groupon platform is expected to be a tailwind for the company’s top line. However, competition from giants like eBay EBAY and Amazon AMZN remains a concern.

Nevertheless, the rollout of the company’s new card-linked platform, Groupon+ that replaces the voucher system and makes discounting processes easy, is expected to be a positive.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $645 million while earnings are projected to be a penny per share. The revenue estimate for North America is around $445 million.

Notably, Groupon expects EBITDA to decline sequentially as the company plans to continue its investments in marketing and offline campaigning activities.

Groupon, Inc. Price and EPS Surprise

Groupon, Inc. Price and EPS Surprise | Groupon, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Groupon is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Groupon’s Earnings ESP is -16.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Groupon carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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