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Why Selling Eat24 to GrubHub Is a Good Thing for Yelp

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Yelp to sell Eat24 to GrubHub

GrubHub (GRUB) has announced that it will be acquiring food delivery service company Eat24 from Yelp (YELP) for $287.5 million. Yelp announced its fiscal 2Q17 numbers on Thursday, August 3, and the stock has surged 20% to $37 since the results came out.

The deal could be a positive for Yelp. The food delivery space is becoming increasingly competitive, and Yelp’s strength is providing information about restaurants. The company’s stock fell 17.7% before the deal and the release. Eat24 will enhance GrubHub’s scale, which GrubHub says will help it compete with other companies.

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Yelp and GrubHub post satisfactory numbers

Yelp’s revenue for fiscal 2Q17 came in at $208.9 million, compared with analysts’ estimate of $205 million. Its revenue rose 20% from 2Q16. Its advertising revenue came in at ~$187 million. The company estimates that it will have revenue of $855 million–$865 million in fiscal 2017, above the $856 million that Wall Street expects.

The company raked in EPS (earnings per share) of $0.09, while Wall Street expected -$0.03. In the same quarter last year, the company posted EPS of $0.01.

GrubHub also reported its quarterly earnings on Thursday, and they were in line with estimates. Its revenue beat Wall Street estimates. The company posted EPS of $0.26 and revenue of $159 million. Wall Street expected revenue of $153 million and EPS of $0.26.

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