How Facebook Fared against Consensus Estimates in 1Q16



Facebook outperformed consensus estimate by an average 11.8%

Facebook (FB) had a decent run in the past three quarters. In fact, the company reported stellar 1Q16 results crushing all estimates. On average, Facebook outperformed the consensus estimate in the trailing four quarters by 11.8% thanks to its strong advertising revenues. An earnings surprise happens when actual earnings come in above the consensus estimate.

Facebook’s peers including Twitter (TWTR), Baidu (BIDU), and LinkedIn (LNKD) have also reported strong positive earnings surprises in the trailing four quarters. However, what differentiates Facebook from others is that it is highly profitable.

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Facebook’s earnings to grow at 30.6%

Analysts expect Facebook’s earnings to grow at an average annual rate of 30.6% over the next five years. Facebook has taken measures to grow user base and user engagement, which in turn enables the company to attract advertisers. Further, Facebook remains successful in containing costs, as almost all the cost drivers saw a relative decline on a YoY basis during the last reported quarter.

Considering Facebook’s impressive start to 2016 and efforts to augment its core operations, 2016 could be another strong year for Facebook. No wonder analysts expect Facebook’s earnings to see a YoY increase of 87.8% in 2016.

Facebook constitutes 7.4% of the iShares U.S. Technology ETF (IYW).


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