A month has gone by since the last earnings report for Uber Technologies (UBER). Shares have added about 30.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Uber’s Q3 Loss Wider Than Expected
Uber incurred a loss of 62 cents per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 60 cents. However, the loss narrowed by 8.8% year over year. Meanwhile, total revenues of $3,129 million missed the Zacks Consensus Estimate of $3,143.7 million. The top line dropped approximately 18% year over year due to weakness in the ride-hailing segment, thanks to coronavirus keeping most people homebound.
Following an organizational change in the third quarter of 2019, Uber started reporting through five segments, namely, Mobility (formerly Rides), Delivery (formerly Eats), Freight, Advanced Technologies Group (“ATG”) and Other Technology Programs, and All Other (formerly Other Bets).
In the third quarter, majority (46.4%) of the company’s revenues came from Delivery. Revenues from this segment skyrocketed more than 100% year over year to $1,451 million. The company’s delivery business is experiencing a boom with online order volumes from homebound customers surging. Mobility revenues plunged 53% year over year to $1,365 million, while Freight revenues climbed 32% to $288 million. Meanwhile, ATG and Other Technology Programs generated revenues of $25 million, up 47%.
Total revenues declined 30% year over year to $1,674 million in the United States and Canada. While revenues fell 39% to $320 million in Latin America, it increased 20% to $641 million in Europe, the Middle East and Africa. Moreover, the same soared 43% to $494 million in the Asia-Pacific region. Monthly active platform consumers declined 24% to $78 million.
Gross bookings from Mobility declined 53% to $5,905 million. Meanwhile, gross bookings from Delivery augmented more than 100% to $8,550 million. Gross bookings from Freight also climbed 30% to $290 million. Total gross bookings slipped 10% to $14,745 million.
Cost of revenues (excluding depreciation and amortization) decreased year over year despite higher driver incentives. Total expenses declined 13.7% year over year to $4,245 million with sales and marketing expenses falling nearly 17% and research and development expenses decreasing 34.7%.
Uber exited the third quarter with cash and cash equivalents of $6,154 million compared with $10,873 million at the end of 2019. Long-term debt, net of current portion at the end of the quarter, was $6,667 million compared with $5,707 million at 2019-end.
The company continues to be hopeful about its ability to achieve adjusted EBITDA profits before the end of 2021.
Additionally, the recent passage of Proposition 22 by California voters marks a major victory for Uber. This win will allow the company to retain the independent contractor status for its drivers, thus exempting it from the California state law, which would have forced Uber to reclassify its drivers as employees. Classifying drivers as employees would have inevitably raised labor costs for the company. Proposition 22 however, requires Uber to provide its workers with some new benefits and protections.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -6.22% due to these changes.
VGM Scores
At this time, Uber has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Uber has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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