What To Expect From eBay’s Second Quarter Earnings

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eBay (NASDAQ:EBAY) is scheduled to announce its second quarter results on Wednesday, July 18. The company reported a 12% increase in net revenue to $2.6 billion in the most recent quarter. Growth came from both the Transaction and Marketing Services businesses – a trend consistent in recent quarters. In the three most recent quarters, eBay’s Classifieds business has been the highest growing segment, with a 20-22% year-over-year increase in revenues. The other area of strength for eBay has been the online ticketing business StubHub, which reported double digit revenue growth after a slowdown in mid-2017 owing to a weaker event landscape. For the June quarter, we expect both segments to keep up the trend and report double digit growth.

Despite revenue growth in recent quarters, eBay has reported a fall in operating margins, mainly due to an increase in marketing and product development expenses. eBay’s operating profit margin compressed by almost 250 basis points to just under 36% in 2017. However, the rate of margin falls has slowed down in recent quarters. We expect its Q2 adjusted operating profit margin to be roughly flat over prior year levels at around 28%. As a result of strong revenue growth and limited increase in operating expenses for the quarter, we expect eBay’s net income and EPS to be around 14-15% higher on a y-o-y basis to $560 million and $0.52, respectively. Our forecasts are roughly in line with consensus estimates. We have summarized our expectations for Q2’18 on our interactive earnings preview dashboard for eBay. If you disagree with our forecasts, you can change expected segment revenue and margin figures for eBay to gauge how it will impact expected EPS for the June quarter.

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