Nielsen Holdings N.V. (NLSN) is set to report the third-quarter 2014 results on Oct 23. Last quarter, it posted a 1.7% positive surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
The company’s second-quarter earnings of 59 cents per share were above the Zacks Consensus Estimate on the back of higher revenues and solid global expansion. Revenues were up sequentially backed by higher demand for the company's analytics services and growth in retail and audience measurement business.
Nielsen’s continuous effort to increase its geographic reach requires it to maintain uniformity and integrity of information and fundamental processes on an international scale. Moreover, the company continues to invest in technology and infrastructure to keep pace with its clients’ demands and gain an edge over its competitors. We believe Nielsen’s recent expansion into two more South American countries — Bolivia and Paraguay — will expand its revenue base.
However, gross margins were down 70 basis points from the year-ago quarter due to unfavorable product and customer mix. Also, Nielsen’s operating expenses increased to $640.0 million due to increased investments in technology.
Earnings Whispers?
Our proven model does not conclusively show that Nielsen Holdings is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 62 cents. Hence, the difference is 0.00%.
Zacks Rank: Nielsen’s Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
You could consider other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:
Westlake Chemical Corp (WLK), with an Earnings ESP of +2.58% and a Zacks Rank #1 (Strong Buy).
Kirby Corp. (KEX), with an Earnings ESP of +2.92% and a Zacks Rank #1.
Gentherm Inc. (THRM), with an Earnings ESP of +4.65% and a Zacks Rank #1.
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