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What's in the Offing for MercadoLibre (MELI) in Q1 Earnings?

Zacks Equity Research

MercadoLibre, Inc. MELI is set to report first-quarter 2019 results on May 2.

The company missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 60.7%.

Past-Quarter Performance

In the last reported quarter, MercadoLibre reported a loss of 5 cents per share, narrower than the Zacks Consensus Estimate of 18 cents. The figure also compared favorably with a loss of $1.53 in the year-ago period.

Total revenues increased 19.5% year over year (61.8% on an FX neutral basis) to $428 million, surpassing the Zacks Consensus Estimate of $404.4 million. Top-line growth was driven by the company’s strengthening online-to-offline payment offerings.

Q1 Estimates

For the first quarter, the Zacks Consensus Estimate for loss is pegged at 1 cent per share. Further, the consensus mark for revenues is projected at $412.7 million.

Let’s see how things are shaping up for this quarter.

MercadoLibre, Inc. Price and EPS Surprise

MercadoLibre, Inc. Price and EPS Surprise | MercadoLibre, Inc. Quote

Factors to Consider

MercadoLibre’s strengthening key offerings, especially online-to-offline offerings will continue to aid its top-line growth in the to-be-reported quarter.

Further, its strong focus toward delivering enhanced online shopping and payment experience are likely to bolster customer retention rate and engagement rate on its platform in the quarter under review.

Additionally, growing penetration of MercadoLibre’s managed logistic network that helps in reducing time taken for delivery continues to be a tailwind.

All these are likely to accelerate revenue generation of the company in the quarter to be reported.

Further, increasing adoption of MercadoPago on the back of well-performing merchant services, MPOS devices and mobile wallet business, is expected to drive the company’s total payment volume in the first quarter.

Moreover, the company’s payment and credit facility offering via MercadoPago and MercadoCredito are likely to continue aiding its momentum across customer in the first quarter.

Additionally, MercadoLibre’s robust free shipping program is accelerating shipments growth via MercadoEnvios, which remains positive. Further, the company’s redesigned pricing and incentive program are expected to aid the first-quarter results.

However, increasing expenses related to warehousing, infrastructure transition on public clouds, free shipping subsidies and discounts on mPOS devices remain major concerns for the company’s margin expansion.

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. 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.

MercadoLibre has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes the surprise prediction difficult.

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 release.

Paycom Software, Inc. PAYC has an Earnings ESP of +3.17% and a Zacks Rank 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ an Earnings ESP of +5.50% and a Zacks Rank #3.

Expedia Group, Inc. EXPE has an Earnings ESP of +9.01% and a Zacks Rank #3.

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MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
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