eBay Inc. (NASDAQ:EBAY) is set to report FQ1 2014 earnings after the market closes on Tuesday, April 29th. The online auction website's earnings won't quite match the strength of the holiday quarter reported back in January, but growth expectations are lofty. eBay has had its fair share of headlines lately due to interest from activist investor and shareholder Carl Icahn who continues to apply pressure to company management to spin off subsidiary PayPal which he believes will increase shareholder value. Management has stuck to its guns and insists that eBay and PayPal have natural synergies and shouldn't be broken up. This quarter Wall Street is looking for an increase in revenue of 12.7% compared to FQ1 of last year and an increase in earnings by 4c per share. Investors have just slightly higher expectations for Tuesday's report.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
(Click Here to see Estimates and Interactive Features for eBay)
The current Wall Street consensus expectation is for eBay to report 67c EPS and $4.223B revenue, while the current Estimize.com consensus from 47 Buy Side and Independent contributing analysts is 68c EPS and $4.236B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting eBay to beat the Wall Street EPS consensus by 1c per share and beat revenue expectations by a thin margin.
Over the previous 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting eBay's EPS and revenue 4 times and once respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a very small differential on eBay's earnings.
The distribution of estimates published by analysts on the Estimize.com platform range from 64c to 74c EPS and from $4.196B to $4.329B in revenues. This quarter we're seeing a moderate to large range of estimates on eBay.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signals less agreement in the market, which could mean greater volatility post earnings.
At the beginning of the quarter both Wall Street and Estimize took their EPS and revenue projections down steeply. Wall Street reduced its EPS forecast from 73c to 67c while the Estimize community lowered its forecast from 72c to 68c. Wall Street also brought its revenue consensus down from $4.306B to $4.223B while the Estimize consensus fell from $4.309B to $4.236B. Timeliness is correlated with accuracy and we see that earnings expectations are relatively flat going into the report.
The analyst with the highest estimate confidence rating this quarter is iMarcelo, who projects 70c EPS and $4.300B in revenue. iMarcelo is ranked 20th overall among over 4,300 contributing analysts. Over the past 2 years iMarcelo has been more accurate than Wall Street in forecasting EPS and revenue 60% and 40% of the time respectively throughout 20 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, iMarcelo is making a bullish call expecting eBay to beat the Estimize community's expectations on both the top and bottom line.
Analysts from both Estimize and Wall Street are expecting a fairly solid quarter from eBay on Tuesday. Contributing analysts to the Estimize platform expect sales to be up 13% compared to FQ1 of last year and expect FQ1 earnings to increase from 63c per share to 68c per share. There is a lot of action going on in the mobile and electronic payments area right now but eBay management has reiterated that it has no plans to spin off PayPal to meet Mr. Icahn's demands. Expect a solid quarter of growth with no news about PayPal from eBay on Tuesday.