Will Green Dot (GDOT) Miss on Earnings?

Green Dot Corporation (GDOT) is set to report third-quarter 2013 results on Oct 31 after the closing bell. Last quarter it posted a 4.17% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Green Dot, which markets prepaid debit cards and related services both at retail locations and online, is facing strong competition from major players like American Express. American Express recently launched a reloadable prepaid card, giving stiff competition to Green Dot’s Walmart MoneyCard. AmEx’s new card has a lower monthly maintenance fee compared to Green Dot's card, making it more attractive to customers.

Moreover, GreenDot faces competition from new entrants in the market like drug stores and grocery store operators, which have launched their own reloadable prepaid cards.

These factors are expected to negatively affect Green Dot’s earnings this quarter.

Earnings Whispers?

Our proven model does not conclusively show that Green Dot 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.

Negative Zacks ESP: The Expected Surprise Prediction or ESP for Green Dot is -5.88%. That is because the Most Accurate estimate stands at 16 cents while the Zacks Consensus Estimate is higher at 17 cents.

Zacks Rank: Green Dot’s Zacks Rank #4 (Sell) when combined with a negative 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.

Other Stocks to Consider

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

MasterCard Inco. (MA),has Earnings ESP of +0.14% and a Zacks Rank #2 (Buy).

VeriFone Systems, Inc. (PAY), has Earnings ESP of +5.56% and a Zacks Rank #2 (Buy).

SouFun Holdings Ltd. (SFUN), has Earnings ESP of +1.16% and a Zacks Rank #1 (Strong Buy).

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