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We expect Latin American carrier, NII Holdings Inc. (NIHD - Analyst Report) to beat expectations when it reports its first-quarter 2013 results before the market opens on May 2, 2013.

Why a Likely Positive Surprise?

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

Positive Zacks ESP: 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 +19.12%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): NIHD currently has a Zacks Rank #3. Note that the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) have a significantly higher chance of beating the earnings. 

The combination of NIHD’s Zacks Rank #3 (Hold) and +19.12% ESP makes us confident of a positive earnings beat on May 2, 2013.

What is Driving the Better-Than-Expected Earnings?

We expect NIHD to deliver positive results based on its strategic decision to revamp its business model, which includes deployment of 3G wireless networks in emerging Latin American economies and increase in distribution of channels by expanding its retail outlet base. The company has already started offering 3G services in Mexico and Brazil based on which we expect NIHD to attain subscriber growth in the upcoming quarter.

Recently, NII Holdings combined with Motorola Mobility to launch Atrix HD smartphone in Mexico, which is preloaded with NIHD’s PTT service. NIHD’s Mexico customers will be able to enjoy the PTT service with a high-end smartphone.

This will be a new source of revenue for the company. However, we remain concerned about the stiff competition and increased promotional expenses in the Latin American market coupled with foreign exchange risk, which could restrain NIHD’s earnings growth.

Other Stocks to Consider

Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:

American Tower Corporation (AMT - Analyst Report) currently has an Earnings ESP of +6.25% and holds a Zacks Rank #3 (Hold).

TELUS Corporation (TU - Analyst Report) has an Earnings ESP of +1.89% and holds a Zacks Rank #3 (Hold).

Dish Network Corporation (DISH - Analyst Report) has an Earnings ESP of +1.89% and carries a Zacks Rank #3 (Hold).

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