Carvana (CVNA) To Report Q3 Earnings: What's In The Cards?

Carvana Co. (NYSE:CVNA) is set to report third-quarter 2018 results on Nov 7.

The company has missed the Zacks Consensus Estimate in three of the trailing four quarters, recording average negative earnings surprise of 3.48%.

In the last reported quarter, Carvana reported non-GAAP loss of 37 cents, wider than the Zacks Consensus Estimate for loss of 34 cents. Further, the figure was wider than the year-ago quarter’s loss of 28 cents but narrower than first-quarter’s loss of 40 cents.

Revenues of $475.3 million soared 127% from the year-ago quarter and 31.9% on a sequential basis. Moreover, the figure surpassed the Zacks Consensus Estimate of $425 million. The top-line growth was driven by robust retail units sales during second-quarter 2018.

For third-quarter 2018, management expects revenues between $480 million and $520 million, reflecting year-over-year growth of 113-131%.

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

Carvana’s continued focus toward delivering better customer experience remains a significant factor behind its business growth. Moreover, the company’s strengthening responsiveness and increasing usage of customer data continue to personalize its customers’ experiences.

All these are aiding its performance in markets as well as in cohorts. This is anticipated to drive the company’s results in the to-be-reported quarter.

Further, Carvana’s rapid market expansion bodes well for its growing market share. During the third quarter, the company made its foray into 13 markets, consequently taking its presence to a total of 78 markets. Moreover, its growing penetration in the existing markets is a major catalyst.

Moreover, the improving logistic capabilities of Carvana will help it in better connecting these markets. Additionally, the company has opened a vending machine in Philadelphia during the to-be-reported quarter.

We believe all these factors along and the company’s increasing brand awareness initiatives are expected to drive its top-line growth in third-quarter 2018.

Notably, the company is aggressively spending on the development of flexible teams to handle varied customer needs in order to deliver enhanced car buying experience. Consequently, the company’s mounting expenses pose a serious threat to its margin expansion.

Further, the fact that a car sale via the company’s retail business is more profitable than through wholesale auction has made the business cyclical in nature which remains a concern in the near term.

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.

Carvana has a Zacks Rank #4 and an Earnings ESP of -0.45%. Our proven model shows that the company is unlikely to beat estimates in the to-be-reported quarter.

Stocks That Warrant a Look

Here are some stocks worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Adobe Systems (NASDAQ:ADBE) has an Earnings ESP of +0.19% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five9 (NASDAQ:FIVN) has an Earnings ESP of +5.88% and a Zacks Rank #3.

Semtech Corporation (NASDAQ:SMTC) has an Earnings ESP of +1.64% and a Zacks Rank #3.

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