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Is Zillow (Z) Poised to Beat Earnings Estimates?

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Zillow, Inc. is set to report first quarter 2014 results on May 7. Last quarter, it posted a 220.0% positive surprise. We note that Zillow has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 68.0%.

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

Growth Factors this Past Quarter

Zillow offers mobile and web solutions that enable users to find important information about homes. We believe that the strong growth in traffic, frequent new product launches and growing Premier Agent business are the positives for the company going forward.

Moreover, new product launches, which include the newly-designed Zillow Real Estate App for Apple's (AAPL) iPhone and iPad and the Zillow Digs app for iPhone are positives. Additionally, continuing investments in marketing activities will boost traffic going forward. However, these investments will hurt profitability in the near term.

Moreover, fierce competition from the likes of Trulia and Move, Inc. (MOVE) are the major headwinds going forward.

Earnings Whispers?

Our proven model does not conclusively show that Zillow is likely to beat earnings this quarter. That is because a stock needs to have both a positive  Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  The Most Accurate estimate coincides with the Zacks Consensus Estimate of a loss of 22 cents. Hence, the difference is of 0.0%.

Zacks Rank: Zillow’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

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.

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