Can Fitbit (FIT) Stock Surprise Investors Post Q3 Earnings?

Fitbit Inc. (NYSE:FIT) is set to report third-quarter 2016 results on Nov 2. Last quarter, the company posted a positive earnings surprise of 75.00%.

Let us see how things are shaping up for this announcement.

Factors at Play

Fitbit reported solid second-quarter results with both the top line and the bottom line exceeding the respective Zacks Consensus Estimate.

The company's overseas growth and the rise in corporate wellness programs are expected to add users to its ecosystem and drive third-quarter results. At the same time, Fitbit introduced enhancements in other regions, such as launching Chinese, Japanese and Korean language versions of its products for their respective markets. These innovations will significantly enhance user experience on the Fitbit platform, thus, drive growth.

However, Fitbit faces stiff competition from several fitness-device makers such as Garmin Ltd. (NASDAQ:GRMN), Jawbone and Misfit.

For the third quarter, Fitbit expects revenues in the range of $490–$510 million. The Zacks Consensus Estimate is pegged at $503.5 million. Non-GAAP earnings per share are expected between 17 cents and 19 cents. The company expects non-GAAP gross margin within 48–49% an ad non-GAAP tax rate of approximately 30%.

Earnings Whispers

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

Zacks ESP: The Most Accurate estimate stands at 12 cents while the Zacks Consensus Estimate is pegged at 11 cents. Hence, the difference is +9.09%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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

Stocks to Consider

Ashford Hospitality Prime, Inc. (NYSE:AHP) is slated to report third-quarter earnings results on Nov 2. The company has an Earnings ESP of +9.76% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avon Products Inc. (NYSE:AVP) with an Earnings ESP of +33.33% and a Zacks Rank #1. The company is slated to report third-quarter earnings results on Nov 3.

Glaukos Corporation (NYSE:GKOS) with an Earnings ESP of +100.0% and a Zacks Rank #1. The company is slated to report third-quarter earnings results on Nov 10.

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