Internet Stocks' Q2 Earnings on Aug 6: ZG, RNG and Others
The second-quarter earnings season is well past the halfway mark with results from 381 S&P 500 members out as of Aug 2.
Per the latest Earnings Preview, total earnings of these index members are up 25% year over year on the back of 10.4% higher revenues. Beat ratios are impressive with 80.1% of the companies beating earnings estimates and 73.8% coming ahead of revenue expectations.
Further, the report suggests that second-quarter earnings for total S&P 500 companies are projected to improve 23.9% year over year, with total revenues increasing 8.6%.
The Technology sector, of which Internet stocks are a part, appears to be quite strong. For the sector, earnings are expected to improve 31.6% year over year while revenues are likely to rise 12.2%. Notably, it is one of the 14 sectors anticipated to report double-digit earnings growth in the quarter to be reported.
Notably, Internet stocks had a terrific first half of 2018, thanks to growing number of Internet users, improving speed & penetration, rapid adoption of 4G Volte technology, increasing demand for videos and proliferation of online retail.
Strong e-commerce growth, expanding online delivery modes and increasing usage of social-media platforms are key catalysts. A shift in consumer preferences, driven by convenience and easy accessibility, is a tailwind.
However, this does not ensure earnings beat for all companies in the space. It should be noted that a company’s earnings outperformance is dependent on the overall business environment as well as management’s ability to implement operating and strategic plans.
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. Zacks Rank #4 (Sell) or #5 (Strong Sell) are best avoided.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Let’s see what’s in store for the following three Internet stocks slated to report on Aug 6.
Zillow Group Inc. ZG is a provider of real estate and home-related brands on the web and mobile. The company is likely to beat second-quarter 2018 expectations as it has a favorable combination of a Zacks Rank #2 and an Earnings ESP of +15.38%.
The results are likely to benefit from strong growth of its Premier Agent Business. Moreover, increasing traffic at its mobile apps and websites, strong rental demand and MLS partnerships are positives. (Read more: Zillow Group to Report Q2 Earnings: Is a Beat in Store?)
Notably, the company beat the Zack Consensus Estimate in three of the trailing four quarters, delivering an average positive earnings surprise of 9.5%.
Zillow Group, Inc. Price and EPS Surprise
Zillow Group, Inc. Price and EPS Surprise | Zillow Group, Inc. Quote
RingCentral Inc. RNG, a provider of solutions for business communications primarily in the United States, also has a favorable combination of Zacks Rank #2 and an Earnings ESP of +2.63%. The Zacks Consensus Estimate for earnings and revenues for the second quarter is pegged at 15 cents and $155.6 million, respectively. The estimates, when compared with the year-ago quarter’s actual figures, indicate growth of 275% for earnings and 30.3% for earnings.
RingCentral has a positive record of earnings surprises in the trailing four quarters, with an average beat of 33.3%.
Ringcentral, Inc. Price and EPS Surprise
Ringcentral, Inc. Price and EPS Surprise | Ringcentral, Inc. Quote
Twilio Inc. TWLO is a provider of cloud communications platforms that enable developers to build, scale and operate real-time communications within software applications.
The company’s second-quarter results are likely to be driven by increase in active customer account, given the company’s continued focus on introducing products as well as its go-to-market sales strategy.
Notably, the company beat the Zacks Consensus Estimate thrice in the trailing four quarters and matched it once, delivering an average positive surprise of 36.9%.
However, the company currently has an Earnings ESP of 0.00% and a Zacks Rank #3, which makes surprise prediction difficult.
Twilio Inc. Price and EPS Surprise
Twilio Inc. Price and EPS Surprise | Twilio Inc. Quote
Etsy Inc. ETSY operates Etsy.com, a commerce platform to make, sell, and buy goods online and offline. The company boasts an average positive surprise of 109.7% in the trailing four-quarters.
The Zacks Consensus Estimate for earnings and revenues is pegged at 4 cents and $126.5 million, respectively. The estimates, when compared with the year-ago quarter’s actual figures, indicate growth of 24.4% for revenues but a decline of 60% for earnings.
The company has a Zacks Rank #2 and an Earnings ESP of -50.00% .
Etsy, Inc. Price and EPS Surprise
Etsy, Inc. Price and EPS Surprise | Etsy, Inc. Quote
Five9 Inc. FIVN, a provider of cloud software for data centers, carries a Zacks Rank #3 but has an Earnings ESP of -14.29%.
Nonetheless, we note that the company beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 210.4%.
The second-quarter results are likely to be driven by expanding partnerships and growing traction of products. However, seasonality of the business remains a concern. (Read more: Five9 to Report Q2 Earnings: What's in the Cards?)
Five9, Inc. Price and EPS Surprise
Five9, Inc. Price and EPS Surprise | Five9, Inc. Quote
You can see the complete list of today’s Zacks #1 Rank stocks here.
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