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GrubHub (GRUB) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

GrubHub Inc. GRUB is set to release third-quarter 2017 results on Oct 25.

Last quarter, earnings of 25 cents per share were in line with the Zacks Consensus Estimate but increased almost 13% year over year. The company has a mixed record of earning surprises in the trailing four quarters, delivering an average positive surprise of 9.43%.

Revenues of $159 million beat the consensus mark of $158 million and improved 32.5% from the year-ago period.

Notably, shares of GrubHub have gained 39.1% year to date, significantly outperforming the industry’s18.6% rally.

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

Factors at Play

GrubHub's diverse restaurant base, broader marketing reach and continuous improvement in products are helping it to gain new customers.

Of late, the company has been gaining a lot of traction in the business driven by its branding efforts and ongoing improvements in products and delivery network.

Reportedly, active diners in the second quarter were 9.2 million, up 25% year over year. The company’s recent partnership with Yelp Inc. YELP and Groupon Inc. GRPN will help it expand its user base further.

GrubHub’s acquisition of Eat24, OrderUp and Boston-based Foodler will broaden its list of restaurants and expand its reach by killing competition.

Besides, the company’s expansion outside the Tier 1 market is a positive.

We anticipate the aforementioned factors to continue helping the company in attracting more new diners to try GrubHub services, thereby bringing in incremental revenues in the third quarter.

However, increasing expenses might keep margins under pressure.

GrubHub Inc. Price and EPS Surprise

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

Earnings Whispers

Our proven model does not conclusively show that GrubHub is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: GrubHub’s Earnings ESP is +1.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GrubHub carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock That Warrants a Look

Here is a company that you may want to consider as our model shows that it has the right combination of elements to deliver an earnings beat in its upcoming release:

Applied Materials AMAT with an Earnings ESP of +0.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Groupon, Inc. (GRPN) : Free Stock Analysis Report
 
Yelp Inc. (YELP) : Free Stock Analysis Report
 
GrubHub Inc. (GRUB) : Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
 
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