Web.com Group (WEB) Q2 Earnings: Will It Surprise Again?

Web.com Group, Inc. (NASDAQ:WEB) is slated to report second-quarter 2016 results on Aug 4. In the last reported quarter, Web.com recorded a positive earnings surprise of 10.00%. Moreover, the company has an average four-quarter positive surprise of 10.34%.

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

Factors to Consider

Web.com is a leading provider of online marketing for small businesses. Web.com’s strength in domain businesses and value added solutions is expected to boost its revenues. The company is especially seeing strength in its value-added digital marketing solutions business.

Also, its ability to enable small businesses succeed online with its economical services gives it a competitive advantage. Therefore, the company’s focus on adding higher quality subs in its value added services portfolio will drive revenue growth and profitability in the to-be reported quarter.

In Mar 2016, the company completed the $342 million acquisition of Yodle, a leading provider of cloud value added solutions.

The cost of integration is likely to weigh on financials in the to-be reported quarter as the company expects it to be accretive to the top line from the fourth quarter. This apart, the company is also undertaking a few restructuring initiatives including management shuffling, which can have some negative impact on results in the to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Web.com will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESPand 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: Web.com has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents.

Zacks Rank: Web.com carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise

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 momentum.

Stocks to Consider

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:

Zoetis Inc (NYSE:ZTS) has an Earnings ESP of + 2.27% and a Zacks Rank #1.

U.S. Silica Holdings, Inc. (NYSE:SLCA) has an Earnings ESP of +8.70% and a Zacks Rank #2.

LATAM Airlines Group S.A. (NYSE:LFL) has an Earnings ESP of +166.67% and a Zacks Rank #2.