What’s in Store for Groupon (GRPN) this Earnings Season? – Analyst Blog


Groupon, Inc. (GRPN) is set to release fourth-quarter and full year 2014 earnings results on Feb 12. In the last quarter, the company delivered a positive earnings surprise of 75.00%. Though the company delivered positive earnings surprises in three of the last four quarters, it has a four-quarter average negative earnings surprise of 233.04%.

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

Factors to Consider

Last quarter, Groupon had reported modest results with significant improvements in both the top and bottom lines. Rising e-commerce spending on mobile devices, a profitable domestic market and an underpenetrated international market are among the primary growth drivers for the company.

We believe that company’s business model that focuses on discounts and deals to drive sales is likely to attract many consumers especially in the holiday seasons. Also, the company’s strategy of offering special deals prior to important events like Thanksgiving enhances its popularity. We expect these opportunities to continue to drive top-line growth.

Further, the convenience of online shopping has paved the way for online retailers to enhance their experiences. Moreover, increased traction in the mobile business driven by the increasing adaptability of smartphones and tablets is another positive for the company.

However, the company continues to face significant competition not only from giants like eBay (EBAY) and Amazon.com (AMZN) but also from small companies like LiveDeal, which is a major near-term headwind. Growing competition is expected to keep Groupon’s pricing under tremendous pressure in the near term. Furthermore, it reduces the company’s bargaining power with the merchants as they can move to other deal providers.

Earnings Whispers?

Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 2 cents per share.

Zacks Rank: Groupon carries a Zacks Rank #3 (Hold) which when combined  with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Another Stock to Consider

Here is another stock that you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter:

Criteo SA (CRTO), with an Earnings ESP of +4.00% and a Zacks Rank #3.

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