Online real estate information provider Zillow Inc. (Z) is expected to report fourth-quarter 2014 results on Feb 11. Last quarter, the company posted a positive earnings surprise of 27.3%. Let’s see how things are shaping up for this announcement.
Factors at Play
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 the growing Premier Agent business will aid results in the to-be-reported quarter. Furthermore, we remain encouraged by Zillow’s optimistic fourth-quarter guidance issued along with the third-quarter results.
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., which has now been acquired by News Corp. (NWSA).
Apart from acquisitions, Zillow entered into several partnerships with real estate listing companies and real estate brokers to enhance its product portfolio. However, the company is currently in the high investment phase and therefore, profitability might be an issue in the fourth quarter.
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 stand at 3 cents per share. 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 couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:
NVIDIA Corporation (NVDA), with an Earnings ESP of +3.45% and a Zacks Rank #2 (Buy).
Criteo SA (CRTO), with an Earnings ESP of +4.00% and a Zacks Rank #3.
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