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Key Predictions for Q3 Earnings Reports of W, STMP & More

The third-quarter reporting cycle is past the halfway mark with 272 S&P 500 members, representing 64.2% of the index’s total market capitalization, having already released their results.

Picture Emerging Thus Far

Per the latest Earnings Preview, total earnings of these companies are up 8.7% on a year-over-year basis (75.7% of the companies beat EPS estimates). Total revenues are up 6.7% (66.2% of the companies beat top-line estimates).

Third-quarter earnings of S&P 500 companies are anticipated to be up 5.4% from the year-ago quarter on revenues that are estimated to increase 5.5%. Notwithstanding the weak performance of the Finance sector, total earnings from the remaining index are expected to rise 7.7% while revenues are anticipated to grow 6.1% on a year-over-year basis.

Notably, estimate revisions for the fourth quarter have been favorable. Though estimates largely moved north at the beginning of the earnings season, of late, there has been some movement in the opposite direction. Consequently, estimates are currently at the same level as the beginning of the quarter. However, with more and more companies releasing better-than-expected results, the revisions are anticipated to trend upward again.

Key E-commerce Earnings Coming Up

Let’s take a sneak peek into four Internet commerce companies that are expected to report their quarterly earnings on Nov 2:

Wayfair Inc.’s W third-quarter 2017 results are expected to benefit from strength in the company’s Direct Retail business both in the United States and internationally. In the to-be-reported quarter, U.S. Direct Retail revenues are expected to see strong momentum driven by a secular shift to online home goods purchase and positive impact of initiatives such as proprietary logistics networks, house brands and growth categories.

International Direct Retail business is also expected to remain solid driven by Wayfair’s continuous efforts to improve its offerings and increase brand awareness that are leading to increased customer acquisition and repeat purchases.

The other business is, however, expected to stay lumpy as Wayfair continues to ramp down its retail partner business.

Year to date, Wayfair shares have gained 99.4%, substantially outperforming the 59.5% gain of the industry it belongs to. Wayfair currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Stamps.com Inc.’s STMP mailing and shipping revenues are expected to improve in the to-be-reported quarter. An expanded customer base, lower churn and growth in shipping business are expected to aid growth.

The company is currently working on a number of initiatives such as mailing and shipping portfolio improvement, investments in sales and marketing, shipping customer acquisition and increasing acquisition synergies. Third-quarter results are likely to reflect the impact of these ongoing initiatives.

Year to date, Stamps.com shares have gained 95.7%, significantly outperforming the 59.5% gain of the industry it belongs to. Stamps.com currently has a Zacks Rank #3.

Overstock.com, Inc.’s OSTK third-quarter 2017 results are expected to be negatively impacted by changes in Google search algorithms and rising competition in the e-commerce sector. On the positive side, the company continues to focus on improvement of customer experience as well as on ways to attract and retain customers.

Overstock has been a Bitcoin supporter for more than three years and has successfully leveraged the blockchain technology. The company is trying to establish relationships with major financial and capital market institutions to achieve the expected level of synergy between blockchain and cryptocurrency.  These efforts are expected to continue in the to-be-reported quarter.

Year to date, Overstock shares have gained a massive 162.3%, significantly outperforming the 59.5% gain of the industry it belongs to. The company currently has a Zacks Rank #3.

We expect Mercadolibre, Inc.’s MELI third-quarter 2017 results to be driven by the newly deployed free shipping and loyalty program and mobile initiatives.

Mercadolibre’s user base grew 20% on a year-over-year basis in the second quarter.  We expect this momentum to continue in the to-be-reported quarter driven by strength across the company’s integrated services that offer better cross-usage and give users a strong reason to stick to the company’s platform.

However, margins are likely to remain under pressure due to increased investments toward free shipping and loyalty programs, marketing, chargebacks, as well as higher maintenance, hosting and fraud prevention cost.

Year to date, Mercadolibre shares have gained 53.9%, underperforming the 59.2% gain of the industry it belongs to. Mercadolibre currently has a Zacks Rank #5 (Strong Sell).

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Overstock.com, Inc. (OSTK): Free Stock Analysis Report
 
Stamps.com Inc. (STMP): Free Stock Analysis Report
 
MercadoLibre, Inc. (MELI): Free Stock Analysis Report
 
Wayfair Inc. (W): Free Stock Analysis Report
 
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