Square, Inc. SQ is scheduled to report second-quarter 2018 results on Aug 1.

The company topped the Zacks Consensus Estimate in the trailing four quarters with an average beat of 12.74%.

In the last reported quarter, Square delivered a positive earnings surprise of 20%. Adjusted earnings came in 6 cents, surging 20% on a year-over-year basis but declined 25% sequentially. The figure came ahead of management’s guided range of 3-5 cents per share.

Net revenues were $669 million, increasing 44.8% from the prior-year quarter and 8.6% sequentially. The figure also surpassed the Zacks Consensus Estimate of $624 million and also came ahead of the guided range of $605-$620 million.

Top-line growth was driven by strengthening omni-channel commerce, improving Gross Payment Volume (“GPV”) and robust performance of CashApp in the bitcoin space.

Coming to the price performance, shares of Square have returned 176.6% over a year, outperforming the industry’s rally of 37.7%.

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

GPV & Bitcoin Space: Key Factors

Gross Payment Volume (“GPV”) remains the key growth metric for Square. The company’s strong efforts toward product portfolio expansion and enhancement of service offerings are likely to drive GPV growth in the to-be reported quarter.

Square defines larger sellers as those which make more than $125,000 of annualized GPV and midmarket sellers as those which make more than $500,000 of annualized revenues.

The Zacks Consensus Estimate for GPV for second quarter is currently projected at $21.4 billion which exhibits an impressive growth of 30.5% when compared with the reported figure in the year-ago quarter.

We believe the company’s robust product lines, especially Square Register, and strengthening relationships with the sellers on its platform will continue to accelerate GPV figure in the second quarter.

Further, Bitcoin space holds promise. Square entered this market early this year and generated $34.1 million revenues from it in the last reported quarter. Notably, without bitcoin revenues, the company’s net revenues would have surged 35% year over year instead of the actual figure of 44.8%.

During the second quarter, the company received the virtual currency license called BitLicense from New York State Department of Financial Services. This license will allow Square to facilitate bitcoin trading to its Cash App users residing in the state of New York.

Consequently, we believe growing adoption of Cash App is likely to aid the top-line growth in the to-be-reported quarter.

Square, Inc. Price and EPS Surprise

Square, Inc. Price and EPS Surprise | Square, Inc. Quote

Outlook Revision

Square has issued a revision to guidance for the second quarter. The company has raised outlook for total net revenues and adjusted revenues. However, it kept the guidance for EBITDA unchanged.

Currently, Square is expecting total net revenues between $744 million and $764 million for the second quarter, which is up from the earlier guidance of $740-$760 million.

Further, adjusted revenues are now anticipated to lie in the range of $362-$367 compared with the previous guided range of $355-$360 million.

The upward revision in the outlook for revenues is a result of the company’s completion of acquisition of Weebly during the second quarter. Weebly is likely to aid growth in its omni-channel business.

However, Square has also raised the guidance for net loss due to the cost related to this buyout. Net loss is expected to lie in the range of 8-6 cents per share, wider than the previous range of 4-2 cents.

Although, the guidance for adjusted earnings remains unaltered at 9-11 cents per share.

Nevertheless, the company’s recent issuance of convertible senior notes is likely to impact the net income figure in the second quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Square has a Zacks Rank #3 and an Earnings ESP of -0.27%, which makes surprise prediction difficult.

Stocks That Warrant a Look

Here are few stocks worth considering as our model shows that they have the right combination of elements to deliver an earnings beat in the upcoming releases.

AMETEK AME has an Earnings ESP of +0.43% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies A has an Earnings ESP of +0.88 and a Zacks Rank #3.

Advanced Energy Industries AEIS has an Earnings ESP of +0.53 and a Zacks Rank #3.

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