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Will Strong Competition Hurt Fitbit's (FIT) Earnings in Q3?

Zacks Equity Research

Fitbit Inc. FIT is set to report third-quarter 2019 results on Nov 6. It delivered a positive earnings surprise of 22.22% in the last reported quarter.

The company topped the Zacks Consensus Estimate in all the trailing four quarters, with an average of 163.51%.

Performance in the Last Reported Quarter

Fitbit reported adjusted second-quarter 2019 non-GAAP loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 25 cents.

Revenues of $313.6 million were up 4.7% year over year and 15.3% on a sequential basis. The top line, which surpassed the consensus mark of $312 million, was within management’s guided range of $305-$320 million.

Fitbit, Inc. Price and EPS Surprise

 

Fitbit, Inc. Price and EPS Surprise

Fitbit, Inc. price-eps-surprise | Fitbit, Inc. Quote

Q3 Projection

For third-quarter 2019, Fitbit expects revenues in the range of $335-$355 million, indicating a decrease of 15-10% on a year-over-year basis. The Zacks Consensus Estimate for the same is pegged at $346.3 million, suggesting a decrease of 12% year over year.

Non-GAAP basic net loss per share is expected in the range of ($0.11) to ($0.09). The Zacks Consensus Estimate for loss per share is pegged at 10 cents, implying 350% year-over-year fall.

Let’s see how things have shaped up for this announcement.

Factors to Consider

The company’s robust and expanding product portfolio is expected to have aided its momentum in the fitness wearables market. Fitbit’s product introductions and sustained focus on the health and wellness sector are expected to have aided third-quarter earnings.

The company’s strong efforts toward improvement of software and services for offering more personalization to customers, as well as achieving greater integration into the healthcare ecosystem are anticipated to have been major positives.

It has been making continuous efforts to launch and update low-cost fitness wearables, which are anticipated to have benefited third-quarter revenues. The company is expected to have sold millions of new devices in the to-be-reported quarter.

All these strong endeavors are expected to reflect onthird-quarter results.

Concern

Fitbit, which has become a prominent name for simple fitness wearables, has been hurt by massive competition in the market. It has been facing competition in both high and low-end product range. The company has been competing with Apple Watch on the high-end front. On the lower end, fitness-tracking devices from Jawbone, Garmin Ltd. GRMN and Xiaomi have been posing tough competition. These are likely to negatively reflect on third-quarter results.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Fitbit this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, TripAdvisorhas a Zacks Rank #3.

Stocks That Warrant a Look

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

Mettler-Toledo International, Inc. MTD has an Earnings ESP of +0.35% and a Zacks Rank of #3.

Target Corporation TGT has an Earnings ESP of +5.62% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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