Is A Surprise In Store For GoDaddy (GDDY) In Q3 Earnings?

GoDaddy Inc. (NYSE:GDDY) is expected to report third-quarter 2016 results on Nov 2. Last quarter, the company posted a negative earnings surprise of 10.0%.

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

Factors to Consider

GoDaddy is engaged in the designing and development of cloud-based technology products for small businesses, Web design professionals and individuals.

The company’s strong market position, increasing investments in products, technology platform and customer care should boost third-quarter results. We also expect its focus on delivering innovative and increasingly personalized products and services globally to bear fruit.

Also, the company is striving to expand internationally (reportedly China, Japan, Singapore and Korea) by investing in technology, marketing programs and customer care teams. Growing international presence and the shift toward dynamic online presence for small business will likely play an important role going forward.

However, significant competition, heavy debt burden and controversies surrounding the company pose challenges.

For the third quarter, the company expects revenues in the range of $468–$471 million. The Zacks Consensus Estimate is pegged at $470.0 million. Adjusted EBITDA is expected in the range of $102–$105 million.

Earnings Whispers

Our proven model does not conclusively show that GoDaddy will 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:The Most Accurate estimate is pegged at 1 cent and the Zacks Consensus Estimate stands at 3 cents. Hence, the difference is -66.67%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: GoDaddy carries a Zacks Rank #2, which increases the predictive power of ESP. But the company’s negative ESP makes surprise prediction difficult.

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.

Stock to Consider

Here are some stocks which you may consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

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.

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.

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.

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