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The ADT Corporation (ADT - Analyst Report) is scheduled to report third-quarter 2014 results before the opening bell on Jul 30. In the last reported quarter, ADT’s earnings comfortably beat the Zacks Consensus Estimate by 5 cents. Let’s see how things are shaping up for this announcement.

Factors to Consider

ADT has a strong footprint in the large and growing residential and small business security market. It recently sealed the acquisition of Reliance Protectron, Inc. – one of the largest security monitoring and installation companies in Canada. With this deal, ADT has strengthened its Canadian presence to better serve over 800,000 local customers with the best of products and solutions along with superior customer service in the security industry. In addition, the strategic buy will offer a steady revenue stream to ADT in the imminent future.

However, ADT incurs significant upfront investments for expanding its customer base, including direct material and labour costs to install security and home/business automation systems; indirect sales costs, marketing costs and administrative costs related to installation activities. The economics of the installation business also varies depending on the customer acquisition channel. Consequently, ADT’s long-term profitability is dependent on customer tenure and minimal customer attrition. However, continued customer attrition rate in the recent quarters despite some solid customer retention activities, remains a concern for the company.

Also, ADT has to continually invest in R&D and similar other value drivers that hedge against tough competition. This increases its operating costs and reduces its profitability to some extent.

Earnings Whispers

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

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at 46 cents.

Zacks Rank #3 (Hold): ADT's Zacks Rank #3 when combined with 0.00% 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.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in the future.

Arch Capital Group Ltd. (ACGL - Snapshot Report) earnings ESP of +5.10% and Zacks Rank #2 (Buy).

ConocoPhillips (COP - Analyst Report) earnings ESP of +1.90% and Zacks Rank #2 .

Clayton Williams Energy, Inc. , earnings ESP of +4.46% and a Zacks Rank #1. (Strong Buy).

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