Barrington Research analyst Jeff Houston rate Groupon Inc (NASDAQ:GRPN) as an Outperform as the company will announce its fourth quarter earnings results on Thursday, February 21 after the market closes.

Groupon Inc GRPN

Groupon earnings preview

Groupon Inc (NASDAQ:GRPN) will report Q4/13 results on Thursday, February 20, after the market close. A conference call will be held at 4:00 pm CT. We expect in-line results driven by strong domestic results, holiday-related Goods sales, momentum with mobile usage and deal bank as well as continued improvement in international operations. The company is successfully transitioning from flash-sale emailer to a mobile commerce platform, while executing on its four strategic pillars: mobile, local, pull, and one playbook. We expect management to provide more details on the recent acquisitions of its Korean? peer Tmon ($260 million) and apparel-flash-site Ideeli ($42 million) acquisitions.

Following is a summary of Q4/14 guidance and our estimates.

Active Customers. We forecast 44.4 million, up 8% YOY.

Active Deals. We forecast 75,000, up from 65,000 last quarter and Deal Margin of 44.3%, flat with Q3/13.

Customer Spend (trailing-12-months). We show $137, flat sequentially.

Gross Billings and Deal Margin. We expect billings to be $1.63 billion with a deal margin of 43.1%, in line with last quarter’s margin.

Revenue is guided to be $690?740 million, reflecting 8-16% year-over-year growth. We project $721.3 million. The Street mean was $719.5 million.

Non-GAAP EBIT (CSOI) guidance is $40?60 million, up from Q4/12’s $13.7 million. We forecast $50.0 million (6.9% margin).

Adjusted EPS is guided to be $0.00-$0.02. We forecast $0.01, a penny below the Street.

Groupon’s valuation and recommendation

We maintain our outperform investment rating and $14 price target. Groupon Inc (NASDAQ:GRPN) created a new business category and was one of the fastest growing companies ever. It achieved a $2 billion revenue run rate in just three years, but reached maturity shortly after, delivering single?digit growth the last several quarters. In response, Groupon changed its business plan and most of its leadership team. It has taken critical steps to reduce reliance on the email channel, capitalize on mobile, and improve international operations.

We think Groupon Inc (NASDAQ:GRPN) is poised to reaccelerate growth and profitability; supporting this thesis is recent momentum in domestic results and signs of international stabilization. The company also enjoys a recognizable brand, market share advantage, and significant free cash flow generation. Groupon trades at 1.8x  2015 EV/Rev, below the core Internet group median of 3.4x, but we think it should trade at less of a discount.