GrubHub (GRUB) To Report Q2 Earnings: What's In The Cards?

GrubHub (NYSE:GRUB) is set to report second-quarter 2019 results on Jul 30.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 4.9%.

In the last reported quarter, GrubHub’s adjusted earnings of 30 cents per share beat the Zacks Consensus Estimate by a nickel. However, the figure plunged 42.3% on a year-over-year basis.

The decline can be attributed to higher investments in marketing and advertisements that fully offset strong top-line growth.

Revenues surged 39% year over year to $323.8 million, which also beat the consensus mark of $323 million.

For second-quarter 2019, GrubHub forecasts revenues between $305 million and $325 million. The Zacks Consensus Estimate for revenues is $317.9 million, which indicates growth of almost 32.6% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings is pegged at 30 cents, which has remained steady over the past 30 days.

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

Key Factors to Consider

Grubhub is facing significant competition in the U.S. online food delivery market from expanding services from the likes of DoorDash, UBER Eats, Postmates and Waitr Holdings. However, Amazon’s decision to shut down Amazon (NASDAQ:AMZN) Restaurants bodes well for Grubhub.

Moreover, the company’s margins are likely to be under pressure due to higher spending on marketing. Incremental expenses related to expansion into new delivery market are a headwind. Furthermore, as these markets will take some time to generate volumes, higher upfront costs are expected to hurt profitability in the second quarter.

Nevertheless, the rapidly growing active diner base, driven by acquisitions and partnerships with the likes of Taco Bell, KFC, Dunkin Brands Group (NASDAQ:DNKN) and Smoothie King, is expected to have boosted the company’s top line in the to-be-reported quarter.

Despite stiff competition, the company is well poised on the back of an efficient delivery network and new quality-focused restaurant partners, including renowned brands like Yelp, Groupon and Yum! Brands (NYSE:YUM).

Notably, the company ended first-quarter 2019 with 19.3 million active diners.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

GrubHub has a Zacks Rank #3 and an Earnings ESP of +12.04%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a couple of companies, which, per our model, have the right combination of elements to post earnings beat this quarter:

Asure Software (NASDAQ:ASUR) has an Earnings ESP of +8.11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CGI Group (NYSE:GIB) has an Earnings ESP of +1.27% and a Zacks Rank #2.

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