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GrubHub (GRUB) Q4 Earnings to Gain on Active Diner Growth

Zacks Equity Research

GrubHub GRUB is set to report fourth-quarter 2018 results on Feb 7.

In the trailing four quarters, the company delivered average positive earnings surprise of 23.9%, beating estimates in each. In the last reported quarter, GrubHub’s adjusted earnings of 45 cents per share outpaced the Zacks Consensus Estimate by four cents.

Moreover, revenues surged 51.6% year over year to $247.2 million, which comfortably beat the Zacks Consensus Estimate of $238 million.

For fourth-quarter 2018, GrubHub forecasts revenues between $283 million and $293 million, up from the earlier guided range of $262-$271 million. The company revised guidance on increased order volumes and contribution from LevelUp acquisition.

The Zacks Consensus Estimate for fourth-quarter earnings has been steady at 28 cents over the past 30 days. Moreover, the consensus mark for revenues is $288.9 million, which reflects year-over-year growth of almost 40.9%.

Grubhub Inc. Price and EPS Surprise


Grubhub Inc. Price and EPS Surprise | Grubhub Inc. Quote


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

Key Factors to Consider

GrubHub is expected to benefit from its rapidly growing active diner base and strengthening delivery business. Acquisitions and partnerships are anticipated to help the company rapidly penetrate the expanding food takeout market in the United States.

Acquisitions, including Tapingo, LevelUp, Yelp’s YELP Eat24, OrderUp and Boston-based Foodler, are helping the company acquire new diners. As of Sep 30, 2018, active diners were 16.4 million compared with 9.8 million in the year-ago quarter.

Moreover, the newly launched Grubhub delivery service is likely to expand in served markets (180 at the end of the third-quarter), which is a key catalyst.

However, Grubhub’s margins are likely to be under pressure due to increasing marketing expenses and higher expenses related to expansion into new delivery market and the LevelUp acquisition. LevelUp is expected to bear a negative impact of $2-$3 million on EBITDA in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

GrubHub has a Zacks Rank #3 and an Earnings ESP of +21.07%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are couple of companies, which, per our model, have the right combination of elements to post earnings beat this quarter:

Gogo GOGO has an Earnings ESP of +9.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square SQ has an Earnings ESP of +6.06% and a Zacks Rank #2.


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