Zillow Group (ZG) Q3 Earnings: Will It Pull Off A Surprise?

Zillow Group, Inc. (NASDAQ:ZG) is set to report third-quarter 2016 results on Nov 1. Last quarter, the company posted a negative earnings surprise of 443.7%. Let’s see how things are shaping up for this announcement.

Factors at Play

Zillow offers mobile and web solutions that enable users to find important information about homes. Zillow reported mixed second-quarter fiscal 2016 results. Although the company’s adjusted loss per share was wider than the Zacks Consensus Estimate, its revenues surpassed the same.

Zillow expects third-quarter revenue to be between $217 million and $222 million and full-year revenue to be between $830 million and $840 million. Our current revenue estimates for the fourth quarter and the full year stand at $221 million and $836 million, respectively.

We believe that strong traffic growth, frequent product launches and the growing Agent business are positives. In particular, product launches like Zillow Real Estate and Zillow Digs App for Apple Inc.'s (NASDAQ:AAPL) iPhone and iPad are expected to drive growth.

Moreover, the Trulia acquisition will not only make Zillow the number one online real estate information provider in the U.S., but also help it to compete against Move Inc., which has now been acquired by News Corp (NASDAQ:NWSA).

Zillow also entered into several partnerships with real estate listing companies and real estate brokers to enhance its product portfolio. However, the company is currently in the high investment phase and therefore profitability might be an issue in the to-be reported quarter.

ZILLOW GROUP Price and EPS Surprise

ZILLOW GROUP Price and EPS Surprise | ZILLOW GROUP Quote

Earnings Whispers

Our proven model does not conclusively show that Zillow is likely to beat the Zacks Consensus Estimate in its upcoming release. 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Zillow is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 2 cents per share. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Zillow has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% 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 momentum.

Stocks to Consider

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

Mercadolibre, Inc. (NASDAQ:MELI) with Earnings ESP of +8.24% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

HubSpot, Inc. (NYSE:HUBS) with Earnings ESP of +13.89% and a Zacks Rank #3

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