Time Warner Cable Inc. (TWC), a major cable multi service operator (MSO) in the U.S., is scheduled to report its third-quarter 2014 results before the opening bell on Oct 30, 2014.
Last quarter, the company posted a negative earnings surprise of 2.07%. However, the company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 3.2%. Let’s see how things are shaping up ahead of this announcement.
Factors Likely to Influence this Quarter
The addition of NBC Universal’s Sports, News and Entertainment Programming to its TV Everywhere application and a paid interconnection deal with Netflix Inc. should drive Time Warner Cable’s revenues higher in the coming quarters.
On the flip side, mounting programming costs coupled with persistent loss of video customers may hamper the company’s earnings in the third quarter.
Earnings Whispers?
Our proven model does not conclusively show that Time Warner Cableis likely to beat the Zacks Consensus Estimate for earnings 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, that is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.16% for Time Warner Cable. This is because the Most Accurate estimate stands at $1.84 while the Zacks Consensus Estimate is pegged higher at $1.90.
Zacks Rank: Time Warner Cable has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies worth considering as our model shows these have the right combination of elements to post an earnings beat this quarter:
Liberty Interactive Corporation (QVCA) has an earnings ESP of +10.00% and a Zacks Rank #3.
Silver Spring Networks Inc. (SSNI) has an earnings ESP of +10.53% and carries a Zacks Rank #3.
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and also carries a Zacks Rank #3.
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