$Yelp(YELP)$ Is Yelp Likely to Surprise Estimates This Earnings Season?Factors at Play
Yelp is expected to benefit from the strong growth in active local business accounts as well as improving mobile customer engagement. We are encouraged by the company’s international expansion, which will beef up ad revenues in the first quarter. Additionally, its partnerships with Yahoo! and YP.com are the positives going forward.

However, slowing growth in active local business accounts remain a concern. Fierce competition from the likes of Facebook in the brand related revenue market and rising product development cost remain headwinds. Further, investments on product development and higher sales & marketing expenses will continue to hurt profitability for the time being.

Earnings Whispers

Our proven model does not conclusively show that Yelp is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Yelp currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate stands at a loss of 4 cents and the Zacks Consensus Estimate stand at breakeven.

Zacks Rank: Yelp has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a couple of stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Groupon, Inc. GRPN, with an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).

Cogent Communications Holdings, Inc. CCOI, with an Earnings ESP of +33.33% and a Zacks Rank #3.

CACI International Inc. CACI, with an Earnings ESP of +0.79% and a Zacks Rank #3.