Photo Credit: Wangdangle

Groupon, Inc. (GRPN) Consumer Discretionary - Internet & Catalog Retail | Reports February 11, After Market Closes

Groupon is scheduled to report fourth quarter earnings February 11, after the bell. Despite beating on the bottom line in the past 3 quarters, Groupon has been unable to establish market share in its core business. The company recently appointed a new CEO who outlined three focus areas for leading the company to growth: marketing, international expansion and shopping. While Groupon is primed to benefit from these trends in the long run, it will have no bearing on how the company reports tonight. As a result, the Estimize consensus is calling for EPS of $0.01, just a penny higher than the Street, and revenue of $843.96 million, roughly $3 million above the Wall Street consensus. Compared to Q4 2014, this projects a YoY contraction in EPS and revenue of 81% and 8%, respectively. Despite modest third quarter earnings, the Estimize community has been more bearish on Q4 earnings. In the past three months, Estimize users have cut EPS estimates by 12% and revenue by 2%. 

The ongoing restructuring activities under new leadership is expected to come at the expense of shareholders. The company is shifting its strategy from a deal business to a local marketplace focusing on marketing, international expansion and shopping. This reorganization will weigh heavily on financials in the near term and has been a cause of plunging stock prices. Marketing initiatives, which had been neglected in the past, are now a strategic focus as GRPN attempts to stimulate brand awareness. Moreover, stiff competition from the likes of Amazon and waning macroeconomic conditions pose a serious threat to Groupon’s profitability. Recently, Groupon issued weak Q4 guidance pointing to declining gross billings and increasing costs of restructuring activities. With shares trading at less than $3 a share, Groupon has no wiggle room to miss its numbers tonight. Any positive surprise could give the stock a much needed boost.