HubSpot (HUBS) To Post Q1 Earnings: What's In The Cards?

HubSpot Inc. (NYSE:HUBS) is set to release first-quarter 2017 earnings on May 2. Notably, the company has positive record of earnings surprises in the trailing four quarters, with an average surprise of 16.66%.

Last quarter, the company posted a positive earnings surprise of 17.02%. HubSpot reported adjusted loss (including stock-based compensation) of 39 cents per share, which was narrower than the Zacks Consensus Estimate of 47 cents.

Revenues advanced 44% year over year to $76.4 million better than the Zacks Consensus Estimate of $74 million.

HubSpot forecasts revenues in the range of $78.5–$79.5 million for first-quarter 2017, which reflects sequential improvement. Non-GAAP operating loss is expected to in the range of $3.5–$2.5 million. Non-GAAP net loss is expected to be in the range of 10–8 cents per share.

The improving bottom-line and positive guidance has helped HubSpot outperform the Zacks Internet Software industry on a year-to-date basis. While the industry advanced 8.3%, the stock gained 38.1%.

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

Factors to Consider

HubSpot’s cloud-based inbound marketing and sales applications are gaining widespread adoption as evident from the growing customer base, which expanded to 28K at the end of 2016. We believe that the company will benefit from the One HubSpot initiative, cross-selling opportunities, growing marketing agency network and expanding international footprint.

Moreover, partnerships with the likes of Brightcove (NASDAQ:BCOV) and Sales Force Europe (SFE) are anticipated to boost customer base in both domestic and overseas market.

However, management expects normal seasonal headwinds from early hiring, payroll resets and annual compensation adjustment to keep margins under pressure in first-half 2017. Moreover, the recently launched $50 per month marketing starter product will hurt average subscription revenue (ASR) per customer, at least in the near term.

Earnings Whispers

Our proven model does not conclusively show that HubSpot is likely to beat on earnings this quarter. This 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: HubSpot’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 33 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HubSpot carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some companies that, as per our model, have the right combination of elements to post an earnings beat this quarter:

AMETEK Inc. (NYSE:AME) with an Earnings ESP of +1.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avid Technology Inc. (NASDAQ:AVID) with an Earnings ESP of +160.00% and a Zacks Rank #2.

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