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Etsy (ETSY) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Etsy, Inc. ETSY is slated to report second-quarter 2019 results on Aug 1.

Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 49.92%.

Past-Quarter Performance

In the first quarter, Etsy’s delivered a positive earnings surprise of 71.43%. In fact, the company’s earnings of 24 cents was higher than prior-year quarter figure of 10 cents. However, the figure was lower than 32 cents reported in the previous quarter.

Revenues advanced 40.1% year over year to $169.3 million and outpaced the Zacks Consensus Estimate of $169 million. The top line was driven by accelerating Marketplace and Services revenues.  However, the figure declined 15.3% sequentially.

For the second quarter, the Zacks Consensus Estimate for earnings and revenues is pegged at 14 cents per share and $182.57 million, respectively.

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

Etsy, Inc. Price and EPS Surprise

Etsy, Inc. Price and EPS Surprise

Etsy, Inc. price-eps-surprise | Etsy, Inc. Quote

Factors to Consider

The company’s strong efforts toward proper execution of its key growth initiatives — search and discovery, customer liability, marketing, seller tools and services, is likely to benefit second-quarter results. Moreover, Search and discovery continues to act as the key catalyst.

Further, strengthening ecosystem on Etsy’s platform for both sellers and buyers is likely to expand its addressable market size in the to-be-reported quarter. Furthermore, its growing focus toward expansion in U.S. marketplace remains a positive.

Additionally, recommendations available on the company’s listing and landing pages that reflect purchasing patterns, taste and preferences of buyers are expected to aid the conversion rate in the to-be-reported quarter.

Further, advancements in Etsy’s conversation tool have made interaction between buyers and sellers easier. The tool enables buyers to message sellers directly from shop and listing pages, while aiding the sellers to respond quickly. Consequently, this tool is a key catalyst and likely to aid the to-be-reported quarter’s results.

The company is also leveraging TV, cable and digital video channels to expand audience reach, which is likely to drive growth in its marketplace in the quarter under review.

Additionally, Etsy’s progression with cloud migration remains a positive. Moreover, it has started addressing search traffic via Google Cloud, which is a tailwind.
 
All these strong endeavors are likely to drive the company’s top line in the to-be-reported quarter.

However, increasing cloud spending is a matter of concern. Further, the company’s creative campaigns are likely to hike its marketing expenses in the quarter under review.

What Our Model Says

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

Etsy has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes the surprise prediction difficult.

Stocks That Warrant a Look

Here are a couple of stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Clearway Energy CWEN has an Earnings ESP of +15.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.82% and a Zacks Rank #3.

Ciena CIEN has an Earnings ESP of +5.26% and a Zacks Rank #2.

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