Orbitz Worldwide, Inc. OWW is slated to report second-quarter 2015 results on Aug 6. Last quarter, the company posted a huge negative earnings surprise of 750.00%.
Factors to Consider
Orbitz reported weak first-quarter results with both the top line and the bottom line missing the respective Zacks Consensus Estimate.
Management stated that the total cost of revenues increased 70% year over year to $72.5 million last quarter because of a rise in customer service costs and fraudulent transactions. Per the company, the fake transactions resulted from the illicit use of credit card information obtained elsewhere.
Orbitz entered into a definitive agreement under which Expedia will acquire Orbitz Worldwide for $12 per share in cash. The acquisition is expected to boost Orbitz’s offerings for customers and partners.
However, according to UBS analyst Eric Sheridan, "The likelihood that deal gets regulatory approval in DC is going down. If that deal were to not go through, the stock would drop quite a bit."
Earnings Whispers
Our proven model does not conclusively show that Orbitz is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: While the Most Accurate estimate stands at 9 cents, the Zacks Consensus Estimate stands at 8 cents. Hence, the difference is +12.50%.
Zacks Rank: Orbitz currently has a Zacks Rank #5 (Strong Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies that you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
ZAGG Inc. ZAGG, with an Earnings ESP of +12.50% and a Zacks Rank #2.
Sprint Corporation S, with an Earnings ESP of +25.00% and a Zacks Rank #3.
Interxion Holding NV INXN, with an Earnings ESP of +6.67% and a Zacks Rank #3.
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