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Expedia Inc. (EXPE - Analyst Report) is set to report third-quarter 2013 results on Oct 30. Last quarter, it posted an 18.6% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Expedia’s earnings in the last quarter were 14 cents, short of the Zacks Consensus Estimate, due to lower-than-expected revenues. Though revenues were up sequentially, Expedia’s Hotels.com and Hotwire brands saw increased competition from Priceline’s (PCLN) Booking.com, TripAdvisor (TRIP) and Trivago. Gross margins also expanded due to higher volumes in the last quarter.

We believe Expedia’s growth in Asia (much lower ADRs and revenue per room night) remains much stronger than other regions and this will likely cast a negative impact on margins but increase volumes.

Earnings Whispers?

Our proven model does not conclusively show that Expedia will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate estimate stands at $1.24 while the Zacks Consensus Estimate is higher at $1.26. That is a difference of -1.59%.

Zacks Rank: Expedia’s Zacks Rank #3 (Hold) when combined with a -1.59% 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 Stocks to Consider

There are other stocks in the sector that, our proven model shows, are likely to beat earnings this season, which include:

Melco Crown Entertainment Limited (MPEL - Snapshot Report), with Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).

Kemper Corporation (KMPR), with Earnings ESP of +11.36% and a Zacks Rank #1 (Strong Buy).

Exterran Partners, L.P. (EXLP - Snapshot Report), with Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy).

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