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Block expected to post blowout Q1 earnings on back of strong outlook

https://www.msn.com/en-us/money/markets/block-expected-to-post-blowout-q1-earnings-on-back-of-strong-outlook/ar-AA1nZPoP?ocid=BingNewsSerp

Block (NYSE:SQ), the Square and Cash App parent company, is expected to record an increase in both earnings and revenue when it reports first-quarter 2024 results on Wednesday after market close.

The average sell-side analyst sees Q1 adjusted EPS jumping to $0.73 from $0.46 in the previous quarter and $0.40 in the year-earlier period. Total net revenue, too, is forecast to advance to $5.82B from $5.77B in Q4 2023 and $4.99B in Q1 2023.

Jefferies analyst Trevor Williams is calling for another consensus beat on gross profit and EBITDA, though “we see less potential for a major [positive] surprise.

“Despite that, we expect this qtr. to further underscore SQ’s new era of focus and efficiency (faster product velocity on slower expenses growth) and see plenty that can support the bull case for sustainable mid-teens+ growth,” he wrote in a note to clients Monday.
In February, investors bid up the SQ greatly after the payment and fintech app company said it plans to grow its business by getting Cash App users to bank with it, moving up market to service families, and building the next-generation social bank. That announcement was accompanied by an increase in Block’s (SQ) full-year 2024 adjusted EBITDA guidance to above Wall Street expectations.

“For the full year, management issued an ‘at least’ guide, meaning Block could very likely produce far better results than its guidance,” said SA analyst Riyado Sofian. Even if Block (SQ) doesn’t outpace expectations and easily top its guidance, as Sofian believes will be the case, it “still has a long growth runway ahead as Square and Cash App combined have less than 5% market penetration today, with over $205B of Gross Profit opportunity up for grabs.”

Block (SQ) has a solid track record in exceeding earnings expectations, with eight of the last twelve quarterly earnings coming in above consensus. Wall Street has been quite bullish on the profit outlook, with 20 upward EPS revisions over the last three months, compared with just four downward revisions. The revenue outlook was a little more iffy (13 upward revisions vs. eight downward revisions).

Bank of America contended in a recent note that a positive catalyst could include in-line gross profit, with 2024 guidance reiterated, and some EBITDA upside, when SQ discloses Q1 results Wednesday.

Separately, shares of Oakland, California-based Block (SQ) dropped 9.2% in Tuesday midafternoon trading at least partly amid a report that federal prosecutors are examining financial transactions at the company