Solid GPV Growth Likely to Drive Square (SQ) Q4 Earnings
Square, Inc. SQ will report fourth-quarter 2017 results on Feb 27.
Notably, the company has a positive record of earnings beat in three of the trailing four quarters, with an average surprise of 58.68%. Last quarter, the company delivered a positive earnings surprise of 16.67%.
Adjusted earnings of 7 cents per share were significantly better than 1 cent delivered in the year-ago quarter. Massive growth can primarily be attributed to 33.3% surge in total net revenues, which totaled $585.2 million, better than the consensus mark of $574 million.
For fourth-quarter 2017, total net revenues are expected between $585 million and $595 million. Loss is anticipated in the range of 6-7 cents per share.
The Zacks Consensus Estimate for earnings shows an increase of 275% year over year to 7 cents per share for the soon-to-be reported quarter. The consensus estimate for revenues is currently pegged at $601.6 million, up 33.1% year over year.
Notably, the stock has returned a massive 161.8% in the past year, better than the 28.2% rally of the industry.
Let’s see how things are shaping up for this announcement.
GPV Growth to Continue
We believe that increasing volume of online transaction presents significant growth opportunity for Square.
Momentum in the company’s Gross Payment Volume (“GPV”) is anticipated to continue driven by growth in both larger as well as midmarket sellers. Square defines larger sellers as those who make more than $125,000 of annualized GPV and midmarket sellers as those who make more than $500,000 of annualized revenues.
In the third quarter, Square processed $17.4 billion of GPV, which soared 31% year over year. GPV from large sellers (48% of total GPV) increased 44%, while GPV from midmarket sellers escalated 64% from the year-ago quarter.
Moreover, the strategic partnership with Eventbrite is anticipated to boost GPV.
The Zacks Consensus Estimate for GPV is currently pegged at $17.7 billion for fourth-quarter 2017.
Square, Inc. Price and EPS Surprise
Square, Inc. Price and EPS Surprise | Square, Inc. Quote
Solid Product Portfolio, International Expansion: Key Catalysts
In the third quarter, the company launched Square Register. The user friendly feature of the device is expected to drive adoption, which will drive top-line growth. As noted by management, the device along with Square Stand expands the company’s suite of countertop hardware products.
Moreover, launch of Square Stand for contactless and chip in Australia is likely to boost customer base in the country. The company also launched the reader in Canada, which enabled sellers to accept contactless payments, including Apple Pay, Android Pay, and Interac Flash.
The addition of Interac Flash is likely to boost Square’s adoption rate in Canada. Per management, Interac represents approximately half of all card transactions in the country.
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. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Square has a Zacks Rank #3 and Earnings ESP of +3.96%. Consequently, the company is likely to deliver a positive surprise this quarter.
Other Stocks to Consider
Here are some better-ranked stocks that you may want to consider as our model shows that these too have the right combination of elements to deliver an earnings beat in their upcoming release.
The Trade Desk TTD has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology MU has an Earnings ESP of +1.12% and a Zacks Rank #3.
Analog Devices ADI has an Earnings ESP of +0.57% and a Zacks Rank #3.
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