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We expect online travel company Expedia Inc. (EXPE - Analyst Report) to beat expectations when it reports fourth quarter 2012 results on Feb 5.

Why a Likely Positive Surprise?

Our proven model shows that Expedia is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.64%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell-rated stocks (Zacks Rank #4 and #5) should never be considered going into an earnings announcement. 

The combination of Expedia’s Zacks Rank #3 (Hold) and an ESP +3.64% makes us reasonably confident in looking for a positive earnings beat on Feb 5.

What is Driving the Better-Than-Expected Earnings?

Expedia’s impressive business strategy, a stronger travel market all over the world, contribution from VIA (acquired in April 2012), strength in the company’s hotel business and strategic expansion in Asia are expected to drive results in the upcoming quarter.

We see potential for strong bookings and accelerated share gains on the company’s recent acquisitions and agreements that will likely expand its addressable market. The company is taking measures to expand in the Asia/Pacific region, which is likely to remain one of the strongest drivers of the company’s business over the next few quarters, particularly since online penetration in many Asia/Pacific markets remains relatively low.

As the shift from offline channels continues, with consumers preferring to use the Internet for making travel plans, Expedia will continue to see opportunities in the online travel market. The positive trend is seen in the trailing four-quarter average surprise of 64.97%. We expect Expedia to continue on the growth path.

Other Stocks to Consider

Expedia is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:

Interdigital Inc. (IDCC - Snapshot Report), a Zacks Rank #2 (Buy) with an ESP of +350.0%.

Geospace Tec. Corp. (GEOS - Snapshot Report), a Zacks Rank #2 (Buy) with an ESP of +16.95%.

Autodesk Inc. (ADSK - Analyst Report), a Zacks Rank #2 (Buy) with an ESP of +15.79%.

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