Is j2 Global (JCOM) Poised to Beat Earnings Estimates in Q2?

j2 Global Inc. (JCOM) is set to release its second-quarter fiscal 2014 results after the market closes on Aug 5, 2014.

In the last quarter, the company delivered an 8.96% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

j2 Global’s diversification into cloud business, installation of a media business and initiation of the intellectual property program continue to deliver improved results.

However, j2 Global’s business largely depends on the capacity, affordability, reliability and security of its telecommunication networks. Also, the company’s business revolves around a small number of telecommunication carriers in each geographic region.

Furthermore, j2 Global’s business is sensitive to overall macroeconomic factors, particularly weakness in credit markets. The company has a vast majority of credit-sensitive customers from lending and mortgage industries and other financial institutions. Although revenues from these sources have improved lately, we are apprehensive that future estimates may face volatility due to global economic challenges. Furthermore, synergies from the digital media acquisitions may take longer to materialize than expected.

Earnings Whispers

Our proven model does not conclusively show that j2 Global 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, this is not the case here as elaborated below. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at 77 cents. Hence, the ESP is 0.00%.

Zacks Rank: j2 Global carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP.

However, we caution investors against the stock going into the earnings announcement, as an ESP of 0.00% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Constant Contact, Inc. (CTCT) has an Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).

Baidu, Inc. (BIDU) has an Earnings ESP of +3.23% and a Zacks Rank #2.

Pandora Media, Inc. (P) has an Earnings ESP of +100.00% and a Zacks Rank #3.