Uber (UBER) Up 20.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Uber Technologies (UBER). Shares have added about 20.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Uber due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Uber Incurs Loss in Q1

Uber incurred a loss of 64 cents per share (excluding $1.06 from non-recurring items) in the first quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of 79 cents. The amount of loss also narrowed significantly year over year. Moreover, total revenues of $3,543 million surpassed the Zacks Consensus Estimate of $3,381.5 million. The top line also rose 14.3% year over year owing to a significant rise in Uber Eats revenues.

Following an organizational change in the third quarter of 2019, Uber started reporting through five segments, namely, Rides, Eats, Freight, Other Bets, and Advanced Technologies Group (ATG) and Other Technology Programs.

In the first quarter, majority (69.7%) of the company’s revenues came from Rides, which inched up 2% to $2,470 million. Uber Eats revenues jumped 53% to $819 million and Freight revenues soared 57% to $199 million. Revenues from Other bets came in at $30 million, up 66%. Meanwhile, ATG and Other Technology Programs generated revenues of $25 million in the reported quarter.

Total revenues grew 13% to $2,142 million in the United States and Canada. Revenues rose 13% to $552 million in Europe, the Middle East and Africa as well. Total revenues surged 32% to $352 million in the Asia-Pacific region and increased 10% to $497 million in Latin America. Monthly active platform consumers also grew 11% to $103 million.

Gross bookings from Rides declined 5% to $10.87 billion. This first-ever decline in rides gross bookings was due to stay-at-home orders across the United States and lockdowns in several other nations. Meanwhile, gross bookings from Eats augmented 52% to $4.68 billion. Gross bookings from Freight also climbed 55% to $198 million. Total gross bookings rose 8% to $15.78 billion.

Additionally, cost of revenues (excluding depreciation and amortization) at Uber escalated on higher driver incentives. Total expenses increased 16.3% year over year to $4,806 million despite a 14.9% decline in sales and marketing expenses.

Uber exited the first quarter with cash and cash equivalents of $8.16 billion compared with $10.87 billion at the end of 2019. Long-term debt, net of current portion, at the end of the quarter was $5.7 billion compared with $5.71 billion at 2019-end.

Some Noteworthy Developments

The company recently terminated unprofitable Uber Eats services in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine. Additionally, in the United Arab Emirates, the company will hand over Uber Eats operations to its subsidiary, Careem. The eight ceased operations and the transferred market accounted for 1% of Eats gross bookings and 4% of Eats adjusted EBITDA losses in the first quarter.

Further, the company announced a workforce reduction plan that would affect approximately 3,700 full-time employees in the customer support and recruiting teams. The company attributed this decision to low trip volumes and the present hiring freeze.

Additionally, Uber entered into a deal with Lime, an electric scooter and bike rental company, to transfer its JUMP e-bike and e-scooter business to the latter. In this regard, Uber is leading a $170-million investment round in Lime.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -5.63% due to these changes.

VGM Scores

Currently, Uber has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Uber has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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