Back to top

Image: Bigstock

Gogo (GOGO) to Report Q1 Earnings: What's in the Cards?

Read MoreHide Full Article

Gogo Inc. (GOGO - Free Report) is set to report first-quarter 2018 results on May 4.

The company has lagged the Zacks Consensus Estimate in three of the trailing four quarters with an average negative surprise of 8.60%.

In the last reported quarter, the company posted a loss of 52 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 48 cents as well as the year-ago quarter’s loss of 34 cents.

However, revenues have beaten the consensus mark in the trailing four quarters. In the last reported quarter, revenues increased 17.5% year over year to $188 million, which comfortably surpassed the Zacks Consensus Estimate of $182 million.

The Zacks Consensus Estimate for first-quarter earnings and revenues are currently pegged at a loss of 59 cents per share and $202 million, respectively.
 

Gogo Inc. Price and EPS Surprise

Gogo Inc. Price and EPS Surprise | Gogo Inc. Quote

 

 

Let's see how things are shaping up for this announcement.

Factors at Play

Notably, Gogo shares have lost 15.8% year to date, compared with the industry’s decline of 11.7%.


 

The underperformance can be attributed to Gogo’s inability to deliver profits. Moreover, lack of visibility around the business model is a concern.

However, Gogo operates in a sector (in-flight connectivity) that presents significant growth opportunities, which bodes well for the company.

Gogo’s 2Ku service has been the chief growth driver. Increasing bandwidth through installation of more 2Ku aircraft online is expected to boost take rates, driving top-line growth and improves profitability.

Moreover, launch of products like GOGO TV and Gogo Vision Touch in 2017 are also anticipated to gain traction.

With the introduction of AVANCE L5 and L3, Gogo anticipates to expand its market share in the Business Aviation segment. Notably, the company has already installed 100 AVANCE L5 systems, within six months of availability.

During the quarter, Gogo announced that Aeromexico will install 2Ku on an additional nine Boeing 737-800NG's, bringing the total to 29 aircraft.

However, higher operating expenses due to increase in investment in engineering, design and development as well as sales and marketing pose concerns.

Moreover, de-installation of American Airlines aircraft will impact the CA-NA segment. The company plans to replace these ATG aircrafts with satellite based ones. The newly installed aircrafts will have lower ARPUs compared with the de-installed ones, which is a headwind.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

We believe that Gogo is unlikely to deliver a positive earnings surprise in the first quarter due to an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of -9.55%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are stocks that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in their upcoming release.

Microchip (MCHP - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics (ARW - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank #2.

CyberArk Software (CYBR - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank #3.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in