Leading telecom company AT&T, Inc. (T) is scheduled to release its third-quarter 2014 financial numbers after the closing bell on Oct 23.
In the last reported quarter, the company had delivered a negative earnings surprise of 1.6%. Let’s see how things are shaping up prior to this announcement.
Factors Likely to Influence this Quarter
AT&T is likely to witness strong momentum in both its Wireline and Wireless businesses. Continued strength in the smartphone business owing to the mobile share plan is driving the carrier’s wireless business. With respect to the Wireline segment, management expects positive business trends to continue in the coming quarter driven by strong business revenues and enhanced strategic services.
However, the company faces several limitations in the wireless spectrum division. It recently received a restriction from the Federal Communications Commission (FCC) regarding substantial airwave acquisitions in the upcoming auction. On the financial front, promotional costs associated with Project Velocity IP (VIP) and Agile pose major impediments in the company’s growth trajectory.
Earnings Whispers?
Our proven model does not conclusively show that AT&T 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: AT&T has a negative Zacks ESP of -1.56%. This is because the Most Accurate estimate stands at 63 cents while the Zacks Consensus Estimate is pegged higher at 64 cents.
Zacks Rank: AT&T carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, 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 they have the right combination of elements to post an earnings beat this quarter.
Silver Spring Networks, Inc. (SSNI) has an earnings ESP of +10.53% and carries a Zacks Rank #3.
Liberty Interactive Corporation (QVCA) has an earnings ESP of +10.00% and a Zacks Rank #3.
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and a Zacks Rank #3.
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