Square Inc (SQ) Beats Earnings Estimates, Raises Guidance

Square Inc. (NYSE: SQ) shares were down more than 5 percent in early trading on Thursday after the company reported its second-quarter earnings on Wednesday. Square topped consensus estimates for revenue and earnings per share and raised its full-year guidance, but investors took the opportunity to take some profits on the red-hot stock.

Square reported a second-quarter adjusted EPS loss of 4 cents on revenue of $552 million. Both numbers were better than consensus Wall Street estimates of an EPS loss of 5 cents and revenue of $536.3 million. Revenue was up 25.8 percent compared to the same quarter a year ago.

Gross payment volume of $16.4 billion also topped consensus expectations of $16.02 billion, according to StreetAccount.

In addition, Square raised its full-year EPS guidance from a previous range between 16 and 20 cents to a new range between 21 and 23 cents. Square is now calling for full-year revenue between $925 million and $935 million, up from a previous estimate range of $890 million to $910 million.

“We continue to deliver top-line growth and margin expansion, which reflect our continued ability to attract larger sellers and increase product usage,” CEO Jack Dorsey says in a letter to shareholders.

The negative initial market reaction is likely due to traders locking in profits by dialing back positions after the stock’s impressive 160 percent gain in the past year.

However, Credit Suisse analyst Paul Condra says there is one potentially troubling detail in Square’s otherwise stellar quarter. The company reported a one-time $2.7 million debt write-off that may raise concerns among investors about near-term credit quality.

“While the write-off is a poignant reminder that SQ is indeed (partly) a lending business, we think it unlikely to be indicative of worsening credit trends, and we believe the overall growth remains the main attraction,” Condra says. “While we expect the revised outlook will help support the positive sentiment on the name, it may not be…

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