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Etsy's (ETSY) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Etsy, Inc. ETSY is scheduled to report fourth-quarter 2018 results on Feb 25.

Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, recording average positive surprise of 78.13%.

In the last reported quarter, Etsy delivered earnings of 15 cents per share, beating the Zacks Consensus Estimate by 9 cents. The bottom line surged from 3 cents reported in the previous quarter but was lower than the year-ago quarter’s figure of 21 cents.

Revenues advanced 41.3% year over year and 13.6% sequentially to $150.4 million. The figure also outpaced the Zacks Consensus Estimate of $150 million. Growing revenues from Marketplace and Services categories drove the top line.

Further, introduction of new pricing structure and increasing product investments were major positives.

For the fourth quarter, the Zacks Consensus Estimate for earnings and revenues is pegged at 31 cents per share and $194.9 million, respectively.

Coming to the price performance, shares of Etsy have returned 157.9% over a year against the industry’s decline of 19.6%.
 
Let’s see how things are shaping up for this quarter.



Factors at Play

The company’s solid holiday performance and continued focus toward proper execution of its key initiatives — search and discovery, customer liability, marketing, seller tools and services, is likely to continue driving its top line in the to-be-reported quarter.

Further, Etsy’s strong efforts toward enhancing product offerings are major positives. Increasing product investments of the company aimed at enhancing shopping experience and personalization and customization of purchases continue to strengthen buyer activities on Etsy marketplace.

Additionally, expanding active seller base due to the company’s strategy of using better merchandising techniques is a tailwind. Moreover, subscription packages for sellers on Etsy Plus are aiding growth to the seller base.

Further, Etsy offers notification feature and tools to the sellers with high shipping charges to help them adjust their shipping prices. This is not only benefiting the customers but also the sellers in bolstering their sales.

Consequently, strengthening active buyer and seller base of the company are expected to continue driving its gross merchandise sale (GMS) in the quarter under review.

Moreover, Etsy’s increasing strategic investments, seller shipping promotions, performance marketing budget and strengthening customer services are likely to drive results in the to-be-reported quarter.

However, mounting investments and rising marketing spending on TV advertisements are likely to hurt the company’s profitability. Further, cloud integration costs do not bode well for margin expansion.

Also, intensifying market competition remains a headwind.

Etsy, Inc. Price and EPS Surprise

 

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

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 #2 and an Earnings ESP of -22.58%, which makes the surprise prediction difficult.

Stocks That Warrant a Look

Here are few stocks worth considering as our model shows that it has the right combination of elements to deliver an earnings beat in the upcoming releases.

Square, Inc. SQ has an Earnings ESP of +5.95% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NIC Inc. EGOV has an Earnings ESP of +4.08% and a Zacks Rank #2.

Workday, Inc. WDAY has an Earnings ESP of +0.64% and a Zacks Rank #2.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Etsy, Inc. (ETSY) : Free Stock Analysis Report
 
Workday, Inc. (WDAY) : Free Stock Analysis Report
 
Square, Inc. (SQ) : Free Stock Analysis Report
 
NIC Inc. (EGOV) : Free Stock Analysis Report
 
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Zacks Investment Research