Leading U.S. cable multi service operator (MSO) Cablevision Systems Corporation (CVC) is set to release its third-quarter 2014 results before the opening bell on Nov 6.
Last quarter, Cablevision Systems reported a positive earnings surprise of 66.67%. Notably, the company has surprised earnings in three of the last four quarters, with an impressive average beat of 85.48%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence This Quarter
Cablevision has undertaken several initiatives to enhance the quality of its video offerings. Recently, the company introduced video conferencing under its flagship Lightpath line of managed services. The newly launched cloud-based video conferencing service will primarily target mid-to-large sized business organizations. The company is also increasingly focusing on its WiFi network, called the “Optimum WiFi Network,” for future growth.
Thus, increased Wi-Fi deployment, higher TV to GO network rollout and uninterrupted dividend payments should drive growth in the coming quarters. Moreover, the launch of a high-definition voice service, Litchfield, and the Optimum TV app should help check subscriber churn.
On the flip side, Cablevision continues to lose video subscribers. We believe stiff competition from telecom operators, satellite TV and online video streaming service providers coupled with mounting programming expenses, low cash balance and a highly leveraged balance sheet will continue to act as margin headwinds in the quarters to come.
Earnings Whispers?
Our proven model does not conclusively show that Cablevision is 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, that is not the case here as elaborated below.
Zacks ESP: Cablevision has an earnings ESP of -18.75%. This is because the Most Accurate estimate stands at 13 cents while the Zacks Consensus Estimate is pegged higher at 16 cents.
Zacks Rank: Cablevision has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. Nevertheless, we need to have a positive ESP to be confident of an earnings surprise.
On the other hand, 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 to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
BlackBerry Ltd. (BBRY) has an earnings ESP of +83.33% and carries a Zacks Rank #2 (Buy).
Lumos Networks Corp. (LMOS) has an earnings ESP of +15.39% and a Zacks Rank #2.
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and carries a Zacks Rank #3.
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