Uber misses analyst expectations for Q3 sales – Offers upbeat guidance

Uber Technologies Inc. (NYSE:UBER) shares whipsawed on Tuesday after the ride-sharing company reported weaker-than-expected revenue for the third quarter.

Uber was facing high expectations going into the earnings release as shares nearly doubled since the beginning of the year. The company topped analyst estimates for GAAP profitability in 6 of the past 12 quarters.

How Uber performed in Q3

In the third quarter, Uber reported gross bookings of $35.28 billion, which exceeded the analyst estimate of $34.48 billion. Both key business segments saw their sales come in ahead of consensus.

“Our relentless focus on improving the product experience for both consumers and drivers continued to power profitable growth, with trip growth accelerating to 25%,” said Dara Khosrowshahi, CEO.

“Uber’s core business is stronger than ever as we enter the busiest period of the year.”

Mobility bookings for the quarter amounted to $17.90 billion, while analysts were looking for $17.39 billion. Delivery bookings totaled $16.09 billion, compared to the estimate of $15.83 billion. Uber’s smallest business unit – Freight – saw its bookings arrive at $1.28 billion, somewhere in line with the consensus of $1.3 billion.

However, shares were under pressure after the company reported revenue for the quarter of $9.29 billion, easily below the expected $9.52 billion.

Business model changes in some countries classified certain sales and marketing costs as contra rev by $521m. These changes negatively impacted combined Mobility and Delivery revenue YoY growth by 8 percentage points,” the company said in a press release.

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On the bottom-line, Uber reported earnings per share of 10 cents, ahead of the expected 7 cents. Net income stood at $221 million as the number of trips rose to 2.44 billion. Adjusted Ebitda for the quarter was $1.09 billion, exceeding the estimate of $1.02 billion.

At the end of Q3, Uber said it had 142 million monthly active platform consumers. Analysts were looking for a number just above 144 million.

When it comes to the fourth-quarter guidance, Uber anticipates gross bookings in the range of $36.5 billion to $37.5 billion. Analysts surveyed by Bloomberg were looking for $36.34 billion in Q4 gross bookings.

The mobility and delivery company also expects adjusted Ebitda in the range of $1.18 billion to $1.24 billion, again ahead of the consensus of $1.15 billion.

“Strong topline trends and record profitability demonstrate the durability of our growth and the significant earnings power underlying our platform,” added Nelson Chai, CFO.

“We continue to make disciplined investments in growth opportunities to support long-term value creation for all stakeholders.”

Uber’s forecast assumes a headwind of roughly 2 percentage points quarter-over-quarter, translating to a currency tailwind of approximately 1 percentage point year-over-year. This represents reported YoY growth of 19% to 22%.

The company also said it expects combined Mobility and Delivery Gross Bookings growth of 20% to 23% on a constant-currency basis for the upcoming quarter.

Finally, the company has announced that with the arrival of its new Chief Financial Officer (CFO) in the upcoming weeks, it plans to provide shareholders with an update on a capital return in the next quarter.

Back in September, Uber announced that Prashanth Mahendra-Rajah will join the company on November 13. He previously served as CFO of chipmaker Analog Devices.

As market dynamics shift and competition intensifies, investors engage in active discussions and analyses in stock chat rooms across various online communities, which can sometimes provide early indications of market trends before they’re reflected in broader analyst reports or earnings results.

Winning race vs. Lyft

Uber’s main rival in the U.S., Lyft, recently introduced price cuts with the aim of making a small dent in Uber’s market share. However, the efforts were likely not enough to prevent the bigger rival from reporting its second quarterly operating profit.

“(Lyft) has the potential to hurt Uber,” said Adam Ballantyne, senior analyst at Cambiar Investors that owns Uber shares.

“If Uber wants to take more market share quicker from Lyft, it could lower prices. It would not surprise me to see the pricing impact the profit story near term.”

In the second quarter, Lyft experienced its slowest sales growth in two years. Still, analysts anticipate that Lyft will present a more substantial growth story for the September quarter as it attracted more riders by offering lower prices.

According to data analytics firm YipitData, the average price of a standard Lyft ride at the end of September was over 4% cheaper than a similar service from Uber. This represents a significant shift from February when both companies were charging nearly the same price.

Lyft reports results on Wednesday. Analysts are looking for adjusted core earnings of $82.6 billion and revenue rising 8.4%. For Q2, Lyft reported an increase of about 3%.

On the other hand, Uber reported revenue growth of 11% for the third quarter after seeing its sales rise 14.3% in the quarter to the end of June.

“Lyft has narrowed its focus just to ride hailing … and brought in a new management team that’s really focused,” said Christopher Vandergrift, analyst at Columbia Threadneedle Investments.

Summary

Uber shares reacted mostly flat to the company’s earnings for the third quarter. While Uber reported weaker-than-expected revenue for the quarter to end-June, its Q4 forecast topped analyst expectations.