We expect Gannett Co., Inc. (GCI), a diversified media conglomerate, to beat expectations when it reports second-quarter 2014 results on Jul 22. In the last quarter, it posted a positive surprise of 2.17%.
Why a Likely Positive Surprise?
Our proven model shows that Gannett is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Gannett currently has an Earnings ESP of +3.18%. This is because the Most Accurate estimate stands at 65 cents, while the Zacks Consensus Estimate is pegged at 63 cents.
Zacks Rank: Gannett carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of Gannett’s Zacks Rank #3 (Hold) and +3.18% ESP makes us confident of an earnings beat this release.
What is Driving the Better-than-Expected Earnings?
Gannett is repositioning itself to broaden its business model by adding new revenue streams. It is also streamlining its cost structure, strengthening its balance sheet and restructuring its portfolio. We believe that the company’s focus on a subscription-based model and Geodigital services would make it less dependable on traditional advertising revenues. The company is also solidifying its foothold in the rapidly growing broadcast media business.
In the last four quarters, Gannett outperformed the Zacks Consensus Estimate by an average of 1.73%.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements:
Big Lots Inc. (BIG) has an Earnings ESP of +3.33% and a Zacks Rank #2 (Buy).
Williams-Sonoma Inc. (WSM) has an Earnings ESP of +1.89% and a Zacks Rank #2.
Dollar General Corporation (DG) has an Earnings ESP of +1.21% and a Zacks Rank #3.
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