Match Group (MTCH) Q3 Earnings Preview: What To Expect?

Match Group, Inc. (NASDAQ:MTCH) is set to report third-quarter 2016 earnings results after the closing bell on Nov 2.

The company went public last November and in its first earnings announcement as a publicly-traded company, Match Group had missed earnings estimates by 5.3%.

The succeeding quarters proved to be much better, with the company’s earnings beating estimates by 20% in its first-quarter 2016 results, and more recently, by 7.7% in the last reported quarter. The average beat for the three quarters comes to 7.5%.

Let's see how things are shaping up for its fourth earnings report as a public company.

Key Factors Influencing Q3 Results

Match Group is the world’s foremost provider of dating products and operates a portfolio of over 45 brands. Three of its biggest and best known brands are Match.com, OkCupid and Tinder. The company’s reputation, established user base and size should prove to be favorable in the upcoming earnings.

About 60% of the company’s revenues come directly from the users of its dating services in North America, mostly in the form of membership subscriptions. Most of its users connect from mobile devices, where conversion to paid members is also higher. Last quarter, its dating revenues rose 24%, which drove a 21% increase in the top line. This momentum bodes well for the company’s top-line growth in the quarter under review.

Furthermore, a big part of Match Group's growth comes from its acquisitions. Over the past six years, Match Group bought 25 companies for an aggregate of about $1.3 billion. Recently, the company acquired the online dating service – PlentyofFish – which will further add to its revenues in the quarter to be reported.

Match Group has been making profits over the past three years and has been recording top-line growth as well. The company is currently enjoying strong growth, driven by robust growth momentum at Tinder and solid performances from Meetic and Match and the recently acquired, PlentyOfFish.

Last quarter, Tinder and PlentyofFish proved to be key growth drivers for the company and we expect the trend to continue this time as well. Specifically, Tinder is seeing phenomenal performance in international markets with higher conversion and renewal rates and improved ARPU, which should definitely boost earnings.

However, the company is vulnerable to the cannibalization of users and revenues across its competing platforms. In fact, its average revenue per paying user fell sharply (down 10% year over year), reflecting the shift of its focus toward lower-paying brands such as Tinder and OkCupid. These factors might affect the company’s top line in this quarter too.

The company has been struggling with monetization of its services in the face of intensifying competition in the online dating space with apps like Bumble, Hinge and Coffee Meets Bagel. This might just prove detrimental to the company’s top-line growth in the coming quarters.

MATCH GROUP INC Price, Consensus and EPS Surprise

MATCH GROUP INC Price, Consensus and EPS Surprise | MATCH GROUP INC Quote

Earnings Whispers

Our proven model does not conclusively show that Match Group will beat earnings estimates in 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. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at 89 cents.

Zacks Rank: Match Group's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident about an earnings beat.

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

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ball Corporation (NYSE:BLL) , scheduled to release results on Nov 3, has an Earnings ESP of +5.44% and a Zacks Rank #2.

Avon Products Inc. (NYSE:AVP) , slated to release earnings results on Nov 3, has an Earnings ESP of +33.33% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc. (NYSE:ENB) has an Earnings ESP of +27.59% and a Zacks Rank #2. The company will report results on Nov 3.

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