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Netflix Inc. (NFLX - Analyst Report) is set to report its fourth quarter 2012 results on Jan 23. In the prior quarter, the company posted a staggering 160% positive surprise. Let’s see how things are shaping up for this video streaming company.

Growth Factors This Past Quarter

Despite posting a year-over-year increase in the top line, primarily boosted by new subscriber additions; higher costs and margin contractions kept the lid on the company’s earnings. Lower contribution from the DVD business and loss from the international business were also a drag on its margins.

Moreover, management hinted that international losses could increase due to escalation of costs related to content additions and incremental marketing expenses. The recent expansion to the Nordics (Denmark, Norway, Finland and Sweden) is also expected to increase expenses, which in turn could result in the company reporting a fourth-quarter loss.

Earnings Whispers?

The Zacks Consensus Estimate for the fourth quarter stands at a loss of 12 cents while that for fiscal 2012 stands at 4 cents.

Netflix has surpassed estimates in all the preceding four quarters, with a trailing four-quarter average positive surprise of 109.8%. The most significant surprise was 175.0% in the second quarter of 2012.

Estimate revisions have been minimal in the last 30 days, with one upward estimate revision in the past 60 days. As a result, the Zacks Consensus Estimate has remained unchanged for the fourth quarter as well as for 2012. Over the last 60 days, the Zacks Consensus has remained same. For fiscal 2012, over the last 60 days, the Zacks Consensus Estimate has risen by a penny to 4 cents.

The lack of downward movement in estimates signals that the fourth quarter might not be too different from the past quarters. Moreover, the stock carries a Zacks Rank #3 (Hold).

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 momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive Zacks Earnings ESP and a Zacks Rank of #1, #2 or #3 to beat earnings estimates. You could, however, consider stocks like:

Facebook Inc. (FB - Analyst Report), with Zacks Earnings ESP of 9.09% and Zacks Rank #2 (Buy), Amazon.com Inc. (AMZN - Analyst Report), with Zacks Earnings ESP of 20.69% and Zacks Rank #3 (Hold) and Comcast Corp. (CMCSA - Analyst Report) with Zacks Earnings ESP of 1.89% and Zacks Rank #3 (Hold).

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