Continuously strong earnings are a good fundamental indicator of long-term growth of a company. EPS gives a reliable futuristic overview, as it is driven by many aspects like sales growth, product demand, profit margins, and cost control.
Understanding the importance of EPS, I have chosen three companies that are planning to increase their EPS in the future, but have had inconsistent EPS in the past. Let’s find out what strategies these companies have implemented to improve future earnings.
Mobile the key growth driver
North America is a major revenue driver for Groupon Inc (NASDAQ:GRPN), which reported a rise in its revenue of 42% year over year, amounting to $340 million in the first quarter of 2013. The success in North America was driven by increased usage of mobile phones, which increased mobile transactions from its website. As a result, customers grew 13% year over year to 41.7 million on March 31, 2013, out of which 18.2 million were from North America and 23.5 million from international locations.
In North America, almost 45% of the transactions in the first quarter took place through mobile phones, in comparison to 30% in the first quarter of 2012. As a result, there was an increase of 4% in the customers’ demand of goods and services, amounting to $1.41 billion in the first quarter of 2013. With the rise in mobile users, the company expects a rise in its total revenue in the second quarter to approximately $617 million, from $601.4 million in the first quarter of 2013.
Groupon Inc (NASDAQ:GRPN) reported a decline in revenue from its international segment of 18.4% year over year due to its weak performance in Europe. This loss was offset by a rise in revenue from North America. The reason for the company’s under-performance in Europe was huge discount offers given by the company, which made merchants unhappy. To satisfy the active client base of 23.5 million in the international market, the company is planning to improve its services.
It will be providing cheap deals on its marketplace, a mobile app, and a search feature to its customers. Groupon Inc (NASDAQ:GRPN) expects a push towards mobile phones with its customer-friendly applications. The company has patented this process with the name ”Smart Deal”, which identifies target customers for a deal. Smart Deal has been introduced in the U.K. market recently and will be introduced in other international markets to reduce costs. With the change in strategy, the company expects revenue of $2.49 billion in 2013 and $2.62 billion in 2014.
Expansion drives for future growth
JDS Uniphase Corp (NASDAQ:JDSU) acquired Arieso in March 2013 for $85 million in cash. Arieso was acquired to make mobile subscribers’ experience better, as it provides software solutions, which will boost network performance. Arieso software solutions help in detecting, accumulating, and analyzing data from millions of mobile connections to improve user experience in 2G/3G.
This software aims at radio access network, or RAN, which scrutinizes and improves in order to provide a powerful network layout and performance for 3G services. The mobile network market is currently worth $700 million and it will gradually capture $1 billion by 2015. With this acquisition, the company expects to increase its market share in this segment.
There was a fall in revenue from the communications test and measurement, or CommTest, segment of 10.8% quarter over quarter, amounting to $174.2 million, in the third quarter. This fall in revenue was due to competitive pricing in the industry. Currently, with the acquisition of Arieso, the CommTest segment is expected to improve, as mobile subscribers will receive better services. It is expected that in the fourth quarter of 2013, there will be a growth of 7% to 11% in revenue quarter over quarter.