Toast to Report Q2 Earnings: What's in the Cards?

Toast TOST is set to release its second-quarter 2024 results on Aug 6.

The Zacks Consensus Estimate for the top line is currently pegged at $1.23 billion, suggesting 25.45% year-over-year growth.

The consensus mark for loss is estimated to be 2 cents per share, unchanged in the past 30 days. TOST reported a loss of 19 cents per share in the year-ago quarter.

The company's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, delivering an earnings surprise of 6.27%, on average.

Factors to Consider

Toast's second-quarter 2024 performance is likely to have benefited from expanding locations. The company added over 6,000 net locations in the first quarter of 2024, bringing its total to approximately 112,000 locations, up 32% year over year. The momentum is expected to continue, as they gain share in local markets and leverage their go-to-market strategy to drive further growth.

Expanding international locations is expected to have bolstered top-line growth. Toast has been making strides in international markets, including the U.K., Canada and Ireland. They have launched integrated online ordering capabilities and plan to expand their platform further internationally. This expansion is expected to have driven additional growth and increased average revenue per user (ARPU).

SaaS ARR rallied 39% year over year, driven by strong location growth and a 5% increase in SaaS ARPU. Toast continues to anticipate mid-single-digit growth in SaaS ARPU on an ARR basis in the near term.

Toast's recurring gross profit streams, which include fintech and subscription services, increased 33% year-over-year in the first quarter of 2024. The company is expecting continued growth in these areas, with expectations for a 20-24% increase in subscription and fintech gross profit in the second quarter.

Toast's recent launches, such as the restaurant management suite, digital storefront suite and AI-powered marketing suite, are designed to add value for customers. The introduction of AI-driven tools, such as the AI writing assistant, is expected to have continued enhancing customer engagement and driving additional sales.

However, Toast expects its top-line growth rate to be negatively impacted due to the addition of forward flow in its fintech solutions and the compounding of a small one-time benefit from the previous year.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

Toast has an Earnings ESP of 0.00% and a Zacks Rank #2 at present.

Stocks to Consider

Here are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Shopify has an Earnings ESP of +7.78% and a Zacks Rank #2.

Shopify's shares have declined 24% year to date. SHOP is set to report its second-quarter 2024 results on Aug 7.

DigitalOcean DOCN has an Earnings ESP of +2.19% and a Zacks Rank of #1 at present.

DigitalOcean's shares have declined 13.3% year to date. DOCN is set to report its second-quarter 2024 results on Aug 8.

MKSI MKSI has an Earnings ESP of +7.28% and a Zacks Rank #1.

MKSI's shares have gained 16% year to date. MKSI is set to report second-quarter 2024 results on Aug 7.

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