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Factors Likely to Influence Coupa's (COUP) Earnings in Q2

Zacks Equity Research

Coupa Software Inc. COUP is set to release second-quarter fiscal 2020 results on Sep 3. The company beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 232.4%.

Past-Quarter Performance

Coupa Software had reported first-quarter non-GAAP earnings of 3 cents per share against the Zacks Consensus Estimate of a loss of 4 cents. Further, the company reported a loss of 1 cent in the year-ago quarter.

Revenues surged 44% from the year-ago quarter to $81.3 million, driven by growth of 46% in subscription services, which totaled $72.9 million. Professional services & other revenues also improved 31.3% to $8.4 million.

What to Expect in Q2

For second-quarter fiscal 2020, revenues are anticipated between $84.5 million and $85.5 million. Non-GAAP net loss is projected to be 10-12 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $85.5 million, indicating an improvement of approximately 38.8% from the year-ago quarter.

We note that the Zacks Consensus Estimate for loss has remained unchanged in the past week. The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 10 cents per share, suggesting a decline of 300% from the year-ago reported figure.

Notably, Coupa Software stock has returned 97.8% in the past year, outperforming the industry’s rally of 1.1%.

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

Factors to Consider

Coupa Software is benefiting from expanding customer base on the back of growing adoption of spend management platform. This is likely to drive subscription services revenues and gross margin. Moreover, an improving partner base will aid the to-be-reported quarter’s results.

Notably, the company added many new customers, namely American Red Cross, Arkansas Blue Cross and Blue Shield, Baylor University, Dairy Farm international, Exxaro Resources, Goodwill of Central & Southern Indiana, Kroger, MongoDB, NEC America, Provident Mexico, Wikimedia Foundation, to name a few.

The company’s collaboration with PayPal PYPL allows Coupa Pay users access their PayPal account, which in turn is likely to enhance customer experience. The integration is likely to provide customers an enriching experience with more spending volume on their credit and debit cards, lower operational costs and improved security.

This move is also expected to bolster user base of Coupa services and aid the to-be-reported quarter’s top line. Additionally, it is expected to augment Coupa’s payment services, which is likely to provide it a competitive edge in the market. This move is likely to aid upcoming quarterly results.

The company’s expanding relationship with Amazon Web Services (AWS) also bodes well. The deal will enable customers to easily configure their AWS account to send invoices to Coupa Software's platform for touchless digital processing. This move provides greater visibility and efficiency in IT cloud spending.

Further, the company has acquired DCR Workforce, a SaaS application provider. The buyout is aimed at strengthening Coupa Software’s strategy of aiding organizations in managing business spend within a widespread BSM platform.

The company has also acquired Aquiire, a real-time supplier catalog search. The buyout extends Coupa Software’s ability to deliver a comprehensive business-to-business (B2B) shopping know-how across real-time, cached and localized catalog search.

All these factors are expected to positively impact the upcoming quarterly results.

What Our Model Says

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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Coupa Softwarehas a Zacks Rank #3 and an Earnings ESP of +6.6%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some better-ranked stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in its upcoming release:

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +1.35% and a Zacks Rank #3.

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