Netflix Inc. (NFLX - Analyst Report) is slated to report its second-quarter 2013 results on Jul 22, 2013. In the last quarter, it posted a positive surprise of 72.22%. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Netflix’s expanding customer base, diversified content portfolio, new partnerships and potential growth opportunities from international expansions are the primary growth catalysts for the company.
However, higher costs owing to international ventures and licensing fees remain a major concern in the near term.
Our proven model does not conclusively show that Netflix is likely to beat earnings this quarter. This is because a stock needs to have both a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here as you will see below.
Negative Zacks ESP: This is because the Most Accurate Estimate is 40 cents while the Zacks Consensus Estimate is higher at 41 cents. This leads to an ESP of -2.44% for Netflix.
Zacks Rank #1 (Strong Buy):Netflix’s Zacks Rank #1 (Strong Buy) lowers the predictive power of ESP because the Zacks Rank #1 when combined with -2.44% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stock to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Rambus Inc. (RMBS - Snapshot Report) has Earnings ESP of +9.09% and carries a Zacks Rank #1 (Strong Buy)
Zynga Inc. (ZNGA - Snapshot Report) has Earnings ESP of +14.29% and carries a Zacks Rank #1 (Strong Buy)
Apple Inc. (AAPL - Analyst Report) has Earnings ESP of +2.6% and carries a Zacks Rank #3 (Hold)