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Twitter (TWTR) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Twitter TWTR is set to report third-quarter 2019 results on Oct 24.

The company expects third-quarter 2019 total revenues between $815 million and $875 million. The Zacks Consensus Estimate for revenues stands at $876.3 million, indicating an increase of 15.6% from the year-ago quarter’s reported figure.

Meanwhile, the consensus mark for third-quarter earnings has been steady at 20 cents over the past 30 days.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 34.1%.

Twitter reported second-quarter 2019 non-GAAP earnings of $1.58 per share, much higher than 17 cents reported in the year-ago quarter.  Moreover, revenues increased 18% year over year to $841.4 million. On a constant-currency (cc) basis, revenues grew 20%.

Further, average monetizable daily active users (mDAU) totaled 139 million in the reported quarter compared with 122 million in the year-ago quarter and 134 million in the previous quarter.
 

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. Price and EPS Surprise

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

 

Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider

Twitter’s efforts to make the platform more conversational is likely to have helped it expand the monetized user base in the to-be-reported quarter.

Notably, the company launched a faster and more personalized Twitter.com in the quarter. The easy to navigate website comprises features like the dark mode themes — Dim and Lights Out.

Moreover, the company’s initiatives to detect rule violations and enhance the safety of users are expected to have reduced abusive behavior on the platform.

Twitter has also strengthened its reporting features, which allows it to accelerate the process of removing accounts based on tweets reported by users. The company has expanded its rules against hateful conduct to include language that “dehumanizes others on the basis of religion.”

Further, as announced during the quarter, Twitter is testing a tool that will allow users to hide replies to their tweets to reduce online trolls and abuse. The feature is currently available to Canadian users.

Additionally, the company updated its advertising policies concerning state media. On Aug 19, Twitter announced that it will not accept advertising from state-controlled news media entities. Although this move might have hurt third-quarter advertising revenues, it proliferates healthy and open conversations, thereby driving user engagement.   

Further, continued strong demand for video ad products like Video Website Cards and in-stream pre-roll is likely to have contributed to the top line.

Notably, during the quarter, Twitter announced the availability of a 6-second video bid unit for advertisers globally. This is expected to have expanded the company’s advertiser base, considering the growing popularity of short-form videos. This is likely to have aided third-quarter results.

Moreover, the company’s top line in the third quarter is expected to reflect the benefits of an expanding live streaming sports content portfolio.

Nevertheless, Twitter faces significant competition from the likes of Facebook FB, Google and Amazon for ad-dollars. This is likely to have negatively impacted the top line in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of a positive earnings surprise.

Although Twitter has a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Commvault CVLT has an Earnings ESP of +2.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.    

Facebook has an Earnings ESP of +5.01% and a Zacks Rank #3.

Shaw Communications SJR has an Earnings ESP of +3.77% and a Zacks Rank #3.


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