We expect leading U.S. satellite TV operator, DIRECTV DTV, to beat earnings when the company reports first-quarter 2015 results on May 5, before the opening bell.
Last quarter, the company had delivered a 10.07% positive earnings surprise. In the last four quarters, the company’s earnings have outpaced the Zacks Consensus Estimate in three of the past four quarters while meeting the mark in one. This leads to an average beat of 7.62%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that DIRECTV is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.32%. This is because the Most Accurate estimate stands at $1.54, whereas the Zacks Consensus Estimate is pegged at $1.52. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: DIRECTV currently has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of DIRECTV’s Zacks Rank #3 and +1.32% ESP makes us reasonably confident of a positive earnings beat at the company.
What's Driving the Better-than-Expected Earnings?
The continuous adoption of high-end services, the introduction of the TV Everywhere service and company’s decision to launch 4K Ultra HD programming on subscribers’ TV sets should favor DIRECTV’s revenues in the first quarter.
Also, the company has already launched the DLA-1 satellite and is planning to roll out the DLA-2 satellite in the latter half of 2015, which we believe will improve its quality of service. We believe such tactical investments will not only help the company deliver superior video service but will also help it maintain its market share.
Further, growth in the Latin American region should aid the company’s profitability. Additionally, DIRECTV has initiated a massive marketing drive to attract customers to its exclusive programming and such strategies should further help the company gain new subscribers in the coming quarters.
Other Stocks to Consider
DIRECTV is not the only company looking up this earnings season. Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Intuit Inc. INTU, with an earnings ESP of +2.34% and a Zacks Rank #2.
Cogent Communications Holdings, Inc. CCOI, with an earnings ESP of +33.33% and a Zacks Rank #3.
Cincinnati Bell Inc. CBB, with an earnings ESP of +80.00% and a Zacks Rank #3.
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