Zillow Inc (NASDAQ:Z) will release first quarter 2014 earnings after the market closes on Wednesday, May 7, 2014. One the same day, management will discuss financial results via a live audio Webcast beginning at 5:00 p.m. EDT / 2:00 p.m. PDT.
Wall Street anticipates that internet information provider will lose $0.08 per share for the quarter, which is $0.09 less than last year's profit of $0.01 per share. iStock expects Zillow to top Wall Street's consensus number. The iEstimate is -$0.06, two cents more than expected.
Sales, unlike earnings, are expected to increase, skyrocketing 62.2% year-over-year (YoY). Z's consensus revenue estimate for Q1 is $63.2 million, more than last year's $38.9 million.
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Zillow provides real estate and home-related information. Zillow provides products and services to help consumers through every stage of homeownership, such as buying, selling, renting, borrowing and remodeling. The Company makes home-related decisions and enables homeowners, buyers, sellers and renters to find and connect with local professionals. Individuals and businesses that use Zillow have updated information on more than 37 million homes and have added nearly 100 million home photos.
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In its limited public life, Zillow has made mincemeat out of Wall Street's consensus estimate. The online real-estate showcase has exceeded the street's view eight of the last nine quarters by an average of 270% more than forecasted. Typically, Z made $0.05 more than predicted for all nine.
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One would suspect that such solid results would lead to a strong reaction from investors. That was the case for six of the last nine quarterly checkups as the stock climbed from 0.6% to 25.10% while averaging a gain of 11.15% in the three days surrounding the earnings announcements. However, the stock backpedaled two of the last three profit outings and three of the last five, falling -3% last quarter, 10% three quarters back, and -31.30% five quarters ago.
Fortunately, Zillow is an online-based business, which allows us to check a few resources to see how online traffic did during Q1. From the looks of things, traffic for Zillow.com was strong for the first three months of 2014.
Google Trends for the keyword "Zillow" are at an all-time high, Quantcast.com shows a sharp rebound in visitors compared to Q4 2013, and Alex.com's web traffic graph shows the site moving from the 475th ranked website in Q1 2013 to number 202 today. That's a huge shift.
At this point, you might be wondering, sales are expected to jump aggressively, and traffic trend are through the roof, so what gives with earnings?
Simple answer, Z's costs and expenses are rising faster than sales in real terms and as a percent of revenue. In 2013, costs were up 93.15% while the top-line grew at 69.06%. However, cost and expenses were 108.58% of revenue in 2013 i.e. a loss, versus 95.04% in 2012.
But it is not all bad news, the vast majority of the money is being spent on sales and marketing, and Technology and development; both of which iStock sees more as investments than costs. At the same time, cost of revenue only increased 33.95%, which is much slower than sales.
Overall: There is a considerable chance that Zillow Inc (NASDAQ:Z) surpasses Wall Street's top and bottom line expectations based on our traffic checks and Zillow's history. However, if costs continue to increase, the street may not like management's investments today but could pay up for them down the line.
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