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Square (SQ) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Square, Inc. SQ is scheduled to report second-quarter 2019 results on Aug 1.

The company surpassed the Zacks Consensus Estimate in the trailing four quarters with an average beat of 20.39%.

Past-Quarter Peformance

In the last reported quarter, Square had delivered a positive earnings surprise of 37.5%. Adjusted earnings came in 11 cents, which improved 83.4% on a year-over-year basis and came ahead of management’s guided range of 6-8 cents per share.

Net revenues of $959.36 million surpassed the Zacks Consensus Estimate of $942.62 million and also came ahead of the guided range of $918 million to $938 million. The figure increased 43.5% from the year-ago quarter.

The top line was driven by robust contributions from Weebly and Zesty buyouts, and growing adoption of Cash App. Further, continued acceleration in gross payment volume (GPV) of the company drove the results.

Q2 Expectations

For second-quarter 2019, management anticipates net revenues between $1.09 billion and $1.11 billion. The Zacks Consensus Estimate for revenues is pegged at $1.11 billion.

Adjusted earnings are expected in the range of 14-16 cents per share. The Zacks Consensus Estimate for earnings is pegged at 16 cents per share.

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

Square, Inc. Price and EPS Surprise


Square, Inc. Price and EPS Surprise

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

Seller Base Strength: A Key Catalyst

The company’s comprehensive commerce ecosystem that helps it in attracting new sellers and retaining the existing sellers is strengthening the seller base, which in turn is likely to aid the second-quarter results.

Further, the company’s product integrations are driving its seller base growth.

During the second quarter, Square for Restaurants was integrated with orders from Postmates, DoorDash, and POS integration solution Chowly in order to enable sellers to directly access the suite of delivery integration partners on the market.

We believe this integration is likely to aid Square’s momentum across sellers. This in turn is expected to benefit its to-be-reported quarter results.

Upswing in GPV

GPV remains the key growth metric for Square.

The company defines larger sellers as those which make more than $125,000 of annualized GPV and midmarket sellers as those which make more than $500,000 of annualized revenues.

In the first quarter, GPV came in $22.59 billion, increasing 27% year over year.

The Zacks Consensus Estimate for GPV for second quarter is currently projected at $26.8 billion, suggesting growth of 25.2% from the year-ago quarter.

We believe the company’s strengthening relationships with the sellers and robust product portfolio will continue to accelerate GPV figure in the to-be-reported quarter.

Further, its growing mobile initiatives also remain a major positive.

However, higher investments and increasing product development expenses might hurt margins expansion. Further, intensifying competition and foreign exchange fluctuations remain woes.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The 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.

Square has a Zacks Rank #2 but an Earnings ESP of -0.44%, which makes the surprise prediction difficult.

Stocks That Warrant a Look

Here are a couple of stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Clearway Energy CWEN has an Earnings ESP of +15.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.82% and a Zacks Rank #3.

Ciena CIEN has an Earnings ESP of +5.26% and a Zacks Rank #2.

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