1Q17 Report: Can Facebook Continue Beating Expectations?
No misses in the last four quarters
Facebook (FB), whose 1Q17 earnings report is expected on May 3, has had a strong earnings track record, beating consensus estimates in each of the last four quarters. Can it continue this trend when competition for online advertising dollars has recently intensified?
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Bottom line estimates
Consensus estimates call for Facebook (FB) to post EPS (earnings per share) of $1.12 in 1Q17. In 1Q16, Facebook posted EPS of $0.77, beating the consensus estimate of $0.62. In 4Q16, Facebook’s EPS of $1.41 topped the consensus estimate of $1.31.
The chart above shows how Facebook’s EPS trended against consensus estimates in the last four quarters.
Top line expectations
For the top line, consensus estimates call for revenues of ~$7.8 billion in 1Q17. In 1Q16, Facebook generated revenues of ~$5.4 billion, which beat the consensus estimate of ~$5.3 billion. The company’s revenues in 4Q16 totaled ~$8.8 billion, which also topped the consensus estimate of ~$8.5 billion.
A miss would signal a loss of dominance
If Facebook misses its consensus estimates for 1Q17, some investors could take that to mean that smaller competitors like Snap (SNAP), Yelp (YELP), and Verizon’s (VZ) AOL are beginning to supplant Facebook’s dominance in the social advertising space.
Advertising executives speaking on and off the record have recently claimed that marketers are beginning to embrace the idea of buying ads on smaller platforms to challenge the dominance of Facebook and Alphabet’s (GOOGL) Google. Such a shift poses a serious threat to Facebook’s revenues and profits.