Why Is Uber (UBER) Up 3.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Uber Technologies (UBER). Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Uber due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Uber Incurs Loss in Q3

The company incurred a loss of 68 cents per share (or net loss of $1.16 billion, up 18% year over year) in the third quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 83 cents. Moreover, the amount of loss decreased year over year. Total revenues of $3,813 million beat the Zacks Consensus Estimate of $3,746.4 million and also rose 29.5% year over year.

Following an organizational change in the third quarter, Uber started reporting through five segments, namely Rides, Eats, Freight, Other Bets, and Advanced Technologies Group (ATG) and Other Technology Programs.

In the third quarter, majority (75.9%) of the company’s revenues came in from Rides, which increased 19% to $2,895 million. Uber Eats revenues jumped 64% to $645 million while Freight revenues soared 78% to $218 million with gross bookings ascending 81%.

The company’s total gross bookings of $16.46 billion increased 29%. Gross bookings from Rides improved 20% to $12.55 billion. Also, Uber Eats gross bookings of $3.66 billion were up 73%.

Total revenues grew 39% to $2,407 million in the United States and Canada. The same rose 24% to $534 million in Europe, the Middle East and Africa. While total revenues surged 31% to $345 million in the Asia Pacific region, it inched up 2% to $527 million in Latin America. Monthly active platform customers also grew 26% to 103 million.

Additionally, cost of revenues (excluding depreciation and amortization) at Uber, which competes primarily with Lyft (LYFT - Research Report) in the ride hailing market, rose primarily due to higher driver incentives. Total expenses on sales and marketing surged 41.8% to $1.11 billion in the reported quarter.

Uber exited the third quarter with cash and cash equivalents of $12.65 billion compared with $6.41 billion at the end of 2018. Long-term debt, net of current portion, at the end of the quarter was $5.71 billion compared with $6.87 billion at 2018 end.

Outlook

With adjusted net revenue growth of 33% in the third quarter, Uber anticipates this uptrend to continue in the fourth quarter. Additionally, with consistent focus on financial discipline, the company now expects an improvement of $250 million in its 2019 adjusted EBITDA to a loss of $2.8-2.9 billion. The company hopes to achieve EBITDA profit for the full year in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 17.84% due to these changes.

VGM Scores

At this time, Uber has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Uber has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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