Shutterfly, Inc. (SFLY) is set to report fourth-quarter and full-year 2014 results on Feb 12. Last quarter, this online photo-printing service provider posted a positive earnings surprise of 4.27%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Shutterfly’s business is seasonal in nature. It generally posts losses in the first three quarters and profit in the final quarter of the year.
In the fourth quarter, the company expects to post earnings per share within $2.42 to $2.67, compared with earnings of $1.20 in the comparable period last year. Apart from benefitting from the year-end holiday season, the company’s strategic acquisitions, improved offerings in the growing mobile e-Commerce segment, aggressive promotions, affordable prices and easy-to-use products would boost the top line in the to-be reported quarter, which in turn should aid bottom-line growth. In fact, the company’s recent acquisition of GrooveBook – a mobile photo book app subscription service – will substantially boost its customer base.
However, Shutterfly’s expansion plans could have a negative impact on its fourth-quarter profits, as depreciation and equipment costs for expansion and acquisition of manufacturing facilities will lead to elevated expenses. Moreover, the company faces stiff competition from big technology players such as Google Inc. and Facebook, Inc. that have been pursuing strategic acquisitions in the technology and Internet space. These companies, commanding better and effective resources to leverage these buyouts, are eating into Shutterfly’s market share.
Earnings Whispers
Our proven model does not conclusively show that Shutterfly will 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: Shutterfly’s ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.49 per share.
Zacks Rank: Shutterfly’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
Some stocks in the Internet content and Internet commerce sector that have both a positive Earnings ESP and favorable Zacks Rank are:
Global Eagle Entertainment Inc. (ENT), with an Earnings ESP of +100% and a Zacks Rank #3.
Tuniu Corporation (TOUR), with an Earnings ESP of +4.88% and a Zacks Rank #3.
Wayfair Inc. (W), with an Earnings ESP of +57.50% and a Zacks Rank #3.
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