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The largest satellite TV provider in the U.S., DIRECTV (DTV - Analyst Report) is set to release its first-quarter 2013 results before the opening bell on May 7, 2013.

In the last quarter, the company delivered a 33.62% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

We believe that a maturing Pay-TV market in the U.S. coupled with tough competition from cable MSO’s (multi service operator) remain the biggest challenge for DIRECTV. Apart from the MSO’s, the large telecom carriers are also reducing its market share by offering fibre-based TV and other high-speed broadband services. Additionally, DIRECTV is significantly lagging in providing services like streaming facilities and has been losing market share to mainstream pay-TV service providers.  

However, the company has taken some strategic steps to streamline its cost structure through better negotiation with the content providers and focusing more on becoming a premium brand in the U.S., targeting the high-end customers. These steps are expected to bring some respite for DIRECTV in the coming quarter.

Earnings Whispers

Our proven model does not conclusively show that DIRECTV is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because the Most Accurate estimate is $1.05 but the Zacks Consensus Estimate stands at $1.06. This leads to an ESP of -0.94% for DIRECTV.

Zacks Rank #3 (Hold): However, DIRECTV’s Zacks Rank #3 increases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of -0.94% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: 

Research in Motion Limited (BBRY - Analyst Report) has Earnings ESP of +200.00% and carries a Zacks Rank #2 (Buy).

Telus Corp (TU - Analyst Report) has an Earnings ESP of +3.77% and carries a Zacks Rank #3 (Hold).

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

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