ExpediaInc. (EXPE - Analyst Report) is set to report second-quarter 2014 results on Jul 31. Last quarter, the company posted in-line results. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Expedia’s first-quarter earnings of 1 cent were in line with the Zacks Consensus Estimate. Revenues of $1.20 billion were up sequentially as well as year over year, attributable to healthy growth rates across most brands, especially for Expedia, Trivago and Hotels.com.
Margins were, however, affected in the quarter due to higher costs for credit card processing and other charges due to merchant bookings. We believe Expedia’s growth in Asia (much lower ADRs and revenue per room night) remains stronger than in other regions and will likely have a negative impact on margins, while driving up volumes.
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 ESPand a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 68 cents. Hence, the difference is 0.00%.
Zacks Rank: Expedia’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #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
You could consider other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
Semiconductor Manufacturing International Corp. (SMI - Snapshot Report), with anEarningsESP of +33.3% and a Zacks Rank #1 (Strong Buy).
Newfield Exploration Co. (NFX - Analyst Report), with an Earnings ESP of +1.72% and a Zacks Rank #1.
TIM Participacoes S.A. (TSU - Snapshot Report), with an Earnings ESP of +16.67% and a Zacks Rank #1.