Will Yelp Inc.'s (YELP) Earnings Surprise this Season?

Yelp Inc. YELP is set to report second-quarter fiscal 2014 results on Jul 30, 2014. In the previous quarter, the company reported loss of 4 cents per share, much narrower than the Zacks Consensus Estimate of 6 cents. Revenues of $76.4 million were also ahead of the Zacks Consensus Estimate.

Let's see how things are shaping up for this quarter.

Growth Factors in the Past Quarter

Yelp is expected to benefit from strong growth in active local business accounts as well as improving mobile customer engagement. In the first quarter, the company launched a feature that enabled users to add photos via mobile web.

In the first quarter, Yelp had approximately 61.0 million mobile unique visitors (both mobile web and mobile app users), up 52.0% on a year-over-year basis. Approximately 35.0% of the new reviews were contributed through mobile devices. Almost 60.0% of all searches came from mobile in the quarter.

We remain encouraged by the company's international expansion (Japan, Mexico, Argentina and Portugal in 2014) which, in turn, will boost ad revenues. However, 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 and the Zacks Consensus Estimate stand at a loss of 3 cents.

Zacks Rank: Yelp has a Zacks Rank #1 (Strong Buy), 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.

Other 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:

Silicon Motion SIMO, with an Earnings ESP of +12.90% and a Zacks Rank #1.

Cognizant Technology Solutions CTSH, with an Earnings ESP of +6.90% and a Zacks Rank #1.

Synaptics SYNA, with an Earnings ESP of +4.07% and a Zacks Rank #1.

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