Online real estate information provider Zillow (Z) is set to report the third-quarter 2014 results on Nov 5, 2014. Last quarter, the company posted a negative earnings surprise of 13.04%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Zillow offers mobile and web solutions that enable users to find important information regarding homes. We believe that the strong traffic growth, frequent product launches and growing Premier Agent business are the positives, going forward.
Moreover, the Trulia acquisition will not only make Zillow the number one online real estate information provider in the U.S., but also help it to compete against Move Inc., recently acquired by News Corp. (NWSA).
Apart from acquisitions, Zillow entered into several partnerships with real estate listing companies and real estate brokers to grow its product portfolio. However, the company remains in the high investment phase making profitability an issue.
Earnings Whispers?
Our proven model does not conclusively show that Zillow 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 stands at a loss of 11 cents. Hence, the difference is 0.00%.
Zacks Rank: Zillow’s Zacks Rank #3 (Hold) 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.
Stocks to Consider
Here are a few companies worth considering which, as per our model, have the right combination of elements to post an earnings beat this quarter:
Lumos Networks Corp. (LMOS), with an Earnings ESP of +15.39% and a Zacks Rank #2 (Buy).
Manchester United plc (MANU), with an Earnings ESP of +33.33% and a Zacks Rank #3.
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