Mexican telecom behemoth, America Movil S.A.B. de C.V. (AMX), is slated to release its fourth-quarter 2014 results on Feb 10, 2015, after market close.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 46.34%. Moreover, the company has delivered negative earnings surprises in all of the prior four quarters, with an average miss of 23.84%. Let’s see how things are shaping up ahead of this announcement.
Factors Likely to Influence this Quarter
Last year, the government of Mexico undertook steps to reform its telecommunications sector, which was highly monopolistic with one or two companies dominating the market. The new reforms open up considerable scope for investment in Mexico, and can have material adverse impact on the operations of America Movil.
We are also concerned about the interconnection rate reductions in both Mexico and Brazil, which have considerably pressurized America Movil’s margins. The company is also faced with intensifying competition in the Mexican wireless market.
However, America Movil’s significant subscriber gain, healthy wireless data service demand and strong momentum in the PayTV segment will likely drive its revenues higher in the coming quarters. The company continues to expand its network services and boost data revenues through deployment of the advanced 3G wireless technology and increased smartphone penetration. Moreover, the launch of 4G mobile services in Mexico and other parts of Latin America also bodes well for the company.
Earnings Whispers?
Our proven model does not conclusively show that America Movil 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: America Movil has an earnings ESP of -42.59%. This is because the Most Accurate estimate stands at 31 cents while the Zacks Consensus Estimate is pegged higher at 54 cents.
Zacks Rank: America Movil’s Zacks Rank #3 increases the predictive power of ESP. Nevertheless, we need to have a positive ESP to be confident of an earnings surprise.
Note that 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 these have the right combination of elements to post an earnings beat this quarter:
Juniper Networks, Inc. (JNPR) has an earnings ESP of +4.76% and carries a Zacks Rank #1 (Strong Buy).
Comcast Corporation (CMCSA) has an earnings ESP of +1.30% and a Zacks Rank #3.
Cablevision Systems Corporation (CVC) has an earnings ESP of +11.11% and a Zacks Rank #3.
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