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Block Q3 Earnings Meet Estimates: Can Strong Guidance Aid the Stock?
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Block (SQ - Free Report) reported third-quarter 2024 adjusted earnings of 88 cents per share, in line with the Zacks Consensus Estimate. The figure surged 76% year over year.
Apart from being in line in the third quarter of 2024, SQ’s earnings beat the Zacks Consensus Estimate in a couple of quarters in the trailing four quarters and missed once, with the earnings surprise being 9.27%, on average.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net revenues of $5.98 billion missed the consensus mark by 3.9%. The top line, however, increased 6.4% year over year.
SQ shares have declined 10.2%, underperforming the Zacks Technology Services industry’s return of 48.3% and the Zacks Business Services sector’s appreciation of 24%.
However, the company offered solid guidance for fourth-quarter 2024 and increased 2024 guidance for adjusted EBITDA and operating income, which is expected to help the SQ shares recover. Block expects to achieve Rule of 40 in 2026.
SQ’s Top-Line Details
Transaction (28.7% of net revenues) revenues were $1.71 billion, up 3.2% year over year.
Strong Square ecosystem accounted for $1.61 billion in transaction revenues, up 7% year over year. Cash App contributed $99 million to transaction revenues, down 26% year over year.
In the reported quarter, Cash App Card actives grew 11% year over year to 24 million actives.
SQ’s Cash App and Lyft (LYFT - Free Report) inked a partnership to bring a customer-friendly new payment method to the latter’s customers.
Cash App’s partnership with Alphabet’s (GOOGL - Free Report) Google Play offers a preferred alternative payment option when checking out their Android smartphones or tablets.
Square’s partnership with T-Mobile (TMUS - Free Report) is expected to expand its footprint among millions of small businesses.
Subscription and Services (30.1% of net revenues) revenues were $1.8 billion, up 20.4% year over year.
Hardware (0.6% of net revenues) revenues fell 14.1% year over year to $36.4 million.
Bitcoin (40.6% of net revenues) revenues inched up 0.2% year over year to $2.43 billion.
Gross Payment Volume (GPV) was $62.49 billion compared with $60.08 billion. Square’s GPV was $59.87 billion, and Cash App’s GPV was $2.619 billion.
SQ’s Operating Details
Gross profit grew 19% year over year to $2.25 billion. Square generated a gross profit of $932 million, up 16% year over year, and Cash App generated a gross profit of $1.31 billion, up 21% year over year.
Adjusted EBITDA was $807 million, up 69% year over year.
Operating expenses were $1.46 billion, up 1% year over year.
Product development expenses were $442 million, up 3% year over year. General and administrative expenses were $338 million, down 11% year over year. Sales and marketing costs were $476 million, up 8% year over year.
The adjusted operating income was $444 million in the reported quarter, with an operating margin of 20%. SQ reported an adjusted operating income of $90 million in the year-ago quarter.
Block’s Balance Sheet Details
As of Sept. 30, 2024, the cash and cash equivalent balance was $9.9 billion, up from $7.8 billion as of June 30, 2024.
The long-term debt was $5.1 billion as of Sept. 30, 2024, unchanged sequentially.
In the third quarter of 2024, SQ repurchased 5.3 million shares of its Class A common stock for an aggregate amount of $346 million. As of Sept. 30, 2024, $2.86 billion remained available under the current authorization.
SQ Offers Positive Guidance
For the fourth quarter of 2024, Block expects gross profit of $2.31 billion, suggesting year-over-year growth of 14%.
Adjusted EBITDA for the fourth quarter is anticipated to be $725 million.
Adjusted operating income is expected to be $355 million.
For 2024, SQ reiterated its guidance for gross profit at $8.89 billion, indicating growth of 18% from the 2023 reported figure.
The guidance for 2024 adjusted EBITDA has been increased from $2.90 billion to $3 billion. Adjusted EBITDA margin for 2024 is now expected to be 34% better than previous guidance of 33%.
Block revised the guidance for operating income from $1.44 billion to $1.56 billion. Operating margin for 2024 is now expected to be 18% better than the previous guidance of 16%.
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Block Q3 Earnings Meet Estimates: Can Strong Guidance Aid the Stock?
Block (SQ - Free Report) reported third-quarter 2024 adjusted earnings of 88 cents per share, in line with the Zacks Consensus Estimate. The figure surged 76% year over year.
Apart from being in line in the third quarter of 2024, SQ’s earnings beat the Zacks Consensus Estimate in a couple of quarters in the trailing four quarters and missed once, with the earnings surprise being 9.27%, on average.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net revenues of $5.98 billion missed the consensus mark by 3.9%. The top line, however, increased 6.4% year over year.
SQ shares have declined 10.2%, underperforming the Zacks Technology Services industry’s return of 48.3% and the Zacks Business Services sector’s appreciation of 24%.
Block, Inc. Price, Consensus and EPS Surprise
Block, Inc. price-consensus-eps-surprise-chart | Block, Inc. Quote
However, the company offered solid guidance for fourth-quarter 2024 and increased 2024 guidance for adjusted EBITDA and operating income, which is expected to help the SQ shares recover. Block expects to achieve Rule of 40 in 2026.
SQ’s Top-Line Details
Transaction (28.7% of net revenues) revenues were $1.71 billion, up 3.2% year over year.
Strong Square ecosystem accounted for $1.61 billion in transaction revenues, up 7% year over year. Cash App contributed $99 million to transaction revenues, down 26% year over year.
In the reported quarter, Cash App Card actives grew 11% year over year to 24 million actives.
SQ’s Cash App and Lyft (LYFT - Free Report) inked a partnership to bring a customer-friendly new payment method to the latter’s customers.
Cash App’s partnership with Alphabet’s (GOOGL - Free Report) Google Play offers a preferred alternative payment option when checking out their Android smartphones or tablets.
Square’s partnership with T-Mobile (TMUS - Free Report) is expected to expand its footprint among millions of small businesses.
Subscription and Services (30.1% of net revenues) revenues were $1.8 billion, up 20.4% year over year.
Hardware (0.6% of net revenues) revenues fell 14.1% year over year to $36.4 million.
Bitcoin (40.6% of net revenues) revenues inched up 0.2% year over year to $2.43 billion.
Gross Payment Volume (GPV) was $62.49 billion compared with $60.08 billion. Square’s GPV was $59.87 billion, and Cash App’s GPV was $2.619 billion.
SQ’s Operating Details
Gross profit grew 19% year over year to $2.25 billion. Square generated a gross profit of $932 million, up 16% year over year, and Cash App generated a gross profit of $1.31 billion, up 21% year over year.
Adjusted EBITDA was $807 million, up 69% year over year.
Operating expenses were $1.46 billion, up 1% year over year.
Product development expenses were $442 million, up 3% year over year. General and administrative expenses were $338 million, down 11% year over year. Sales and marketing costs were $476 million, up 8% year over year.
The adjusted operating income was $444 million in the reported quarter, with an operating margin of 20%. SQ reported an adjusted operating income of $90 million in the year-ago quarter.
Block’s Balance Sheet Details
As of Sept. 30, 2024, the cash and cash equivalent balance was $9.9 billion, up from $7.8 billion as of June 30, 2024.
The long-term debt was $5.1 billion as of Sept. 30, 2024, unchanged sequentially.
In the third quarter of 2024, SQ repurchased 5.3 million shares of its Class A common stock for an aggregate amount of $346 million. As of Sept. 30, 2024, $2.86 billion remained available under the current authorization.
SQ Offers Positive Guidance
For the fourth quarter of 2024, Block expects gross profit of $2.31 billion, suggesting year-over-year growth of 14%.
Adjusted EBITDA for the fourth quarter is anticipated to be $725 million.
Adjusted operating income is expected to be $355 million.
For 2024, SQ reiterated its guidance for gross profit at $8.89 billion, indicating growth of 18% from the 2023 reported figure.
The guidance for 2024 adjusted EBITDA has been increased from $2.90 billion to $3 billion. Adjusted EBITDA margin for 2024 is now expected to be 34% better than previous guidance of 33%.
Block revised the guidance for operating income from $1.44 billion to $1.56 billion. Operating margin for 2024 is now expected to be 18% better than the previous guidance of 16%.
Zacks Rank
Currently, Block has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.