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What's in the Cards for Zillow Group (ZG) in Q1 Earnings?

Zacks Equity Research

Zillow Group, Inc. ZG is scheduled to report first-quarter 2019 earnings on May 9.
 

Past-Quarter Performance

The company had delivered fourth-quarter 2018 non-GAAP earnings of 1 cent per share, which surpassed the Zacks Consensus Estimate by a penny. However, the bottom line decreased from the year-ago figure of 19 cents per share.

Total revenues increased 29% year over year to $365.3 million and outpaced the Zacks Consensus Estimate of $349 million.
 

Zillow Group, Inc. Price and EPS Surprise

Zillow Group, Inc. Price and EPS Surprise | Zillow Group, Inc. Quote

What to Expect in Q1?

Management expects first-quarter 2019 revenues to be in the range of $417-$443 million. The Zacks Consensus Estimate is currently pegged at $431.58 million, indicating growth of 43.9% from the year-ago quarter.

The Zacks Consensus Estimate stands at loss of 19 cents, against the year-ago earnings of 7 cents.

Let’s see how things are shaping up prior to this announcement.

Factors Likely to Influence Q1 Results

Strength in Premier Agent Business and momentum in new construction marketplaces is expected to continue in first-quarter.

In a bid to increase audience size and improve consumer engagement, Zillow Group introduces innovative advertising and other related marketing enhancements, which is likely to act as a tailwind in the upcoming earnings release.

The company is striving to expand Zillow Offers service, which is live in around nine markets, to “at least 14 by the end of 2019.” This expansion bodes well given the growing clout of Zillow Offers among homeowners willing to sell their homes to the company.

Further, the company is exploring Zillow Offers’ complementarities with other marketing initiatives. Notably, the company acquired Mortgage Lenders of America (MLOA) and rebranded it as Zillow Home Loans. This enabled the company to deploy Zillow Home Loans payment option via Zillow Offers, consequently strengthening service. This is likely to positively influence the to-be-reported quarter’s results.

Zillow Offers is expected to boost traffic growth and impact results positively in the first quarter.

Additionally, Zillow Group is working toward growth of emerging marketplaces. With the combination of machine learning (ML), and personalization, the company anticipates aligning consumer interest with the listed properties. The company’s application that enables agents to create virtual 3D home tours, aiding buyers narrow down their searches before a personal visit, is noteworthy.

Further, expanding footprint in new cities and cities where the company has significant market presence, including the likes of Phoenix, Denver, Irvine, Cincinnati, Lincoln Nebraska, will positively impact the top line in the upcoming quarterly results.

The aforementioned factors are expected to aid the company win new customers. Nevertheless, stiff competition, and higher spending in product enhancements and advertising, is likely to limit margin growth at least in the near term.

What the Zacks Model Unveils

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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Zillow Group carries a Zacks Rank #3 and an Earnings ESP of -9.70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

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

Synopsys, Inc. SNPS has an Earnings ESP of +1.15% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuit Inc. INTU has an Earnings ESP of +0.59% and a Zacks Rank #2.

Agilent Technologies, Inc. A has an Earnings ESP of +2.10% and a Zacks Rank #2.

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Zillow Group, Inc. (ZG) : Free Stock Analysis Report
 
Intuit Inc. (INTU) : Free Stock Analysis Report
 
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