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PayPal (PYPL) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

PayPal Holdings, Inc. PYPL is set to report second-quarter 2019 results on Jul 24.

The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with the average surprise being 7.60%.

In first-quarter 2019, the company reported earnings of 78 cents per share, recording a positive surprise of 16.42%. The figure also surged 37% on a year-over-year basis. Moreover, net revenues improved 12% year over year to $4.13 billion.

In the last reported quarter, PayPal’s strategy of geographic and product diversification, as well as acquisition benefits aided in top-line growth. Further, its Venmo monetization efforts and strength in the APAC business contributed well.

For second-quarter 2019, PayPal expects revenues between $4.3 billion and $4.34 billion. Non-GAAP earnings are anticipated within 68-70 cents per share.

Let’s analyze the factors that are likely to influence its second-quarter results.

 

PayPal Holdings, Inc. Price and EPS Surprise

 

PayPal Holdings, Inc. Price and EPS Surprise

PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote

Portfolio Strength to Aid Growth

PayPal’s robust product portfolio is expected to aid business growth in the to-be-reported quarter.

Venmo’s improving monetization efforts have been aiding the company in attracting new partners to its platform. This is likely to bolster its monthly active user base, which in turn is expected to aid payment volume growth in the to-be-reported quarter.

PayPal’s growing mobile initiatives have been strengthening customer engagement on its platform. One Touch, with strong checkout conversion rates, continues to aid its momentum among merchants and consumers.

The acquisition of Braintree remains a major positive. Positive contributions from this buyout are anticipated to accelerate the company’s transaction number in the to-be-reported quarter.

We believe all these factors are anticipated to bolster PayPal’s active customer accounts and total payment volume (TPV), which forms the basis of the company’s business, in the to-be-reported quarter.

Encouraging Projections

Active customer accounts and TPV are considered to be the key metrics for analyzing the company’s business growth.

For the second quarter, the Zacks Consensus Estimate for active customer accounts is pegged at 283 million, up 3.2% from the year-ago period. Further, the consensus estimate for TPV is $171.7 billion, suggesting an improvement of 17.6% from the year-ago reported figure.

PayPal is currently riding on strong momentum in international markets, especially in India and Japan. Further, its expanding marketplace relationships, strategic partnerships with global financial institutions and strengthening merchant base are tailwinds.

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 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PayPal currently has a Zacks Rank #3 and an Earnings ESP of +14.38%. This indicates that the company is likely to deliver a positive earnings surprise in the upcoming quarterly report.

Other Stocks That Warrant a Look

Here are some other stocks worth considering as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Amazon.com, Inc. AMZN has an Earnings ESP of +15.56% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook, Inc. FB has an Earnings ESP of +0.61% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.54% and holds a Zacks Rank #2.

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