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GoPro (GPRO) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

GoPro Inc. GPRO is scheduled to report second-quarter 2019 results after the closing bell on Aug 1. In the last reported quarter, the company delivered a positive earnings surprise of 22.2%. Notably, GoPro surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 28.1%.

For the second quarter, the company is likely to report higher revenues on a year-over-year basis, supported by healthy growth trajectory.

Factors to Consider

During the second quarter, GoPro expanded its camera Trade-Up program to countries in the European Union. The company is offering trade up from any previous model GoPro or any other digital camera to experience HERO7 Black or Fusion. With this, anyone in the 28 countries included in European Union is entitled to receive €100 or the equivalent amount in local currency off a new HERO7 Black or Fusion by participating in the program.

GoPro also expanded its Damaged Camera Replacement policy as part of the GoPro Plus subscription service. As a result, the company’s users in Germany, France, Spain, Japan, Australia and 25 other countries, can go on any adventure knowing that if they break their devices, the company will replace it, no questions asked. GoPro further integrated its PLUS Subscription service into the GoPro.com checkout experience. This will offer customers the opportunity to effortlessly subscribe to PLUS when purchasing a camera. Notably, the company is witnessing consistent global PLUS subscriber growth, and expects to accelerate the momentum with this move. These are expected to drive the upcoming results.

With such interactive customer engagements, GoPro aims to increase its sales. The Zacks Consensus Estimate for total revenues for the second quarter is pegged at $301 million. In the year-earlier quarter, it generated revenues of $283 million.

In order to improve its bottom line, the company is also shifting the production of most of its U.S.-bound cameras from China to Mexico in the wake of escalating trade conflict between the world’s two largest economies. However, cameras bound for other countries will continue to be produced in China. Reportedly, in June, GoPro began the production of its U.S.-bound cameras in Guadalajara, Mexico, to support sales.

Earnings Whispers

Our proven model does not conclusively show that GoPro will beat earnings in the second quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% with both pegged at 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

GoPro, Inc. Price and EPS Surprise

 

GoPro, Inc. Price and EPS Surprise

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

Zacks Rank: GoPro has a Zacks Rank #2. Although this increases the predictive power of ESP, we need a positive ESP to make us reasonably confident of an earnings beat.  

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
   
Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ciena Corporation CIEN is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. MSI is +1.25% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 1.

The Earnings ESP for TELUS Corporation TU is +2.61% and it carries a Zacks Rank of 2. The company is slated to report quarterly numbers on Aug 2.

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