Mexican telecom behemoth America Movil SAB (AMX Quick QuoteAMX - Free Report) is slated to report third-quarter 2016 results, after market close on Oct 27.

Last quarter, America Movil posted a negative earnings surprise of 45.83%. Moreover, the company’s earnings lagged the Zacks Consensus Estimate in all of the previous four quarters, with an average miss of 62.10%. Let’s see how things are shaping up for this announcement.

Factors at Play

America Movil, which has been ruling the Mexican market for quite some time now, has been witnessing a decline in its profit margin in the region. Stringent regulatory measures and intensifying competition were the primary factors behind the dismal performance. Further, the company faces tough competition from market behemoths like Telefonica SA (TEF Quick QuoteTEF - Free Report) and AT&T Inc. (T Quick QuoteT - Free Report) in Mexico. Thus, if regulatory concerns and competition continue to mount, it could hurt the company’s top and bottom line further. Hence, America Movil is focused on shifting its business centre from the Mexican telecommunication market to that in Brazil through the purchase Oi S.A., the biggest telecommunications company in Brazil and South America, headquartered in Rio de Janeiro. Although Oi may be too large to be acquired by any of the companies but its data centers, fiber networks and mobile operations make lucrative buyout options.

Meanwhile, the undertaking of the massive wholesale shared mobile network project by the government of Mexico could impede America Movil’s growth and weaken its market position further. Moreover, aggressive promotional strategies may hurt margins, affecting the company’s overall profitability in the near term. However, the company’s decision to reduce its fixed-line-to-mobile call rates in a phased manner reflects its compliance with the regulations.

America Movil recently announced that its wireless division – Telcel (Radiomovil Dipsa) – has received a notification from the Federal Telecommunications Institute (IFT) which states that the IFT has decided to evaluate the stringent measures that were imposed on the company in Mar 2014. The authority also declared that it may review these asymmetric regulatory measures.

Earnings Whispers

Our proven model does not conclusively show that America Movil is likely to 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: America Movil has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 17 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: America Movil has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

Here is a company that has the right combination of elements to post an earnings beat this quarter.

Yahoo! Inc. , with an earnings ESP of +7.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.

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