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Will NII Holdings (NIHD) Disappoint This Earnings Season?

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Latin American telecom operator, NII Holdings Inc. is scheduled to report its first-quarter 2014 financial numbers before the opening bell on May 12, 2014.

We note that the company has missed the Zacks Consensus Estimate in 3 of the last 4 quarters with an average negative earnings surprise of 53.4%. Let’s see how the company is positioned prior to the first-quarter earnings announcement.

Factors to Be Considered This Quarter

In order to strengthen its market position, NII Holdings has launched a new business objective called Project Accelerate. This is likely to help the company gain market share and remain competitive through significant investments in marketing and network infrastructure development.

However, NII Holdings believes that the new project may impact its financial position. We believe in the long run, it will be immensely effective in driving revenues for the company.

Higher churn, weaker exchange rate, lower ARPU, increase in operating expenses, stiff competition in the Latin American markets and a high debt burden may act as headwinds for the company in the coming quarters. Moreover, limited 3G deployment and costs associated with it may further undermine the company’s top-line growth.

Earnings Whispers?

Our proven model does not conclusively show that NII Holdingsis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: NII Holding has a negative Zacks ESP. This is because the Most Accurate estimate stands at a loss of $2.22 while the Zacks Consensus Estimate is pegged at a loss of $2.14. This leads to an ESP of -3.74% for NII Holdings.

Zacks Rank: NII Holdings’ Zacks Rank #4 (Sell) further decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks earnings ESP of -3.74% combined with a Zacks Rank #4 lowers the possibility of an earnings surprise.

Note that Sell-rated stocks (#4 and 5) should ideally never be considered going into an earnings announcement.

Other Stocks to Consider

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

BlackBerry Ltd. , which has an earnings ESP of +21.43% and carries a Zacks Rank #2 (Buy).

Intuit Inc. (INTU - Free Report) , which has an earnings ESP of +1.18% and carries a Zacks Rank #2 (Buy).

NVIDIA Corp. (NVDA - Free Report) , which has an earnings ESP of +16.67% and carries a Zacks Rank #3 (Hold).

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