Here's Why Facebook Is Set To Beat Earnings

In a report published Sunday, Oppenheimer analyst Jason Helfstein stated that Facebook Inc (NASDAQ: FB) is expected to report "strong" first quarter results, driven by higher mobile engagement and strong monetization.

According to Helfstein's checks, Facebook will report better first quarter sequential trends in social spend versus the prior year, as improved targeting offsets traditional seasonality. Channel checks also suggested social advertising budgets were "flattish" sequentially, an improvement from a mid-single-digit quarter over decline last year. In addition, improved targeting is driving "meaningfully" higher click-through rates, coupled with Facebook's share of U.S. mobile Internet that increased an estimated 150 basis points year-over-year.

Helfstein estimated Facebook will earn $0.42 per share in the first quarter on revenue of $3.6 billion. This compares to the Estimize Consensus earnings per share estimate of $0.44 per share (based on 139 estimates) on revenue of $3.626 billion. The Wall Street Consensus estimate is calling for an earnings per share of $0.40 on revenue of $3.566 billion.

Related Link: Deutsche Bank Says Dynamic Ads May Be Facebook's 'Catalyst'

Helfstein finally noted that shares of Facebook have "lagged" since its fourth quarter earnings due to the company's 50 percent to 65 percent year-over-year guidance for non-GAAP expense growth. The analyst added that his revenue and EBITDA guidance of $2.13 billion are both in-line with Street expectations, but these figures may be "overly conservative."

The analyst explained, "The Street is modeling first quarter expense growth to outpace the prior quarter's headcount growth by the highest ever delta, which could prove conservative, in our view, especially given US Dollar strength."

Shares remain Outperform rated with an unchanged $100 price target.