Back to top

Analyst Blog

TiVo Inc. (TIVO - Analyst Report) is set to report the second-quarter fiscal 2015 results on Aug 26. Last quarter, the company posted a positive earnings surprise of 16.67%. Moreover, it is worth noting that TiVo has outperformed the Zacks Consensus Estimate in the trailing four quarters with a positive earnings surprise average of 32.09%.

Let us see how things are shaping up for this announcement.

Factors this Past Quarter

TiVo reported mixed first-quarter results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. Both earnings and revenues increased year over year, primarily driven by higher service and technology revenues (80% of revenues) and Hardware revenues (20% of revenues). Subscriptions grew 33.4% year over year to 4.5 million.

The higher number of distribution deals with cable companies will support the company’s expansionary initiatives and strengthen its customer base, which in turn will boost revenues.  We believe that TiVo has significant growth opportunities in Western Europe and Latin America, given its partnerships with local providers. TiVo’s strong balance sheet will also enable it to pursue strategic acquisitions and aggressive share buyback programs will boost near-term growth.

Separately, the legal settlements with AT&T (T - Analyst Report), Microsoft, Verizon, Cisco and Time Warner Cable have created a recurring revenue stream for TiVo that it will enjoy for the next couple of years. Also, TiVo continues to innovate and its strong product pipeline is a major positive, going forward.

However, increasing competition from the likes of Dish Network and Cablevision Systems Corp. seems to be the primary headwind in the near term.

Earnings Whispers?

Our proven model does not conclusively show that TiVo 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents. Hence, the difference is 0.00%.

Zacks Rank: TiVo’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

Here are a couple of 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:

Aruba Networks, Inc. (ARUN - Snapshot Report), with an Earnings ESP of +16.67% and a Zacks Rank #2 (Buy).

Abercrombie & Fitch Co. (ANF - Analyst Report), with an Earnings ESP of +10.00% and a Zacks Rank #2.

Please login to Zacks.com or register to post a comment.