In-flight connectivity provider Gogo Inc. GOGO is slated to release second-quarter 2015 results on Aug 6, before the opening bell.
Last quarter, Gogo delivered a negative earnings surprise of 11.54%. However, the company has posted an average earnings surprise of 3.04% over the past four quarters. Let’s see how things are shaping up for this announcement.
Factors to Consider
Gogo boasts a dominant position among in-flight Wi-Fi service providers. The company also signed a deal with T-Mobile US, Inc. TMUS to provide free in-flight texting and voicemail facilities on all Gogo-equipped aircrafts in the U.S.
We believe that the company’s collaboration with T-Mobile will not only drive its revenues higher but will also help narrow its quarterly losses in the to-be-reported quarter, owing to the latter’s huge customer base in the U.S. Also, Gogo’s onboard Internet connectivity services coupled with its innovative value-added services will drive its fourth-quarter top line.
However, higher operating expenses due to increased investment in the Commercial Aviation – Rest of World (CA-ROW) segment remain a concern. Higher spending in CA-ROW includes the cost of clearing heightened regulatory requirements for bird strike, higher number of aircraft configurations and receiving Supplemental Type Certificates (STC) for the rollout of its satellite connectivity solutions.
Earnings Whispers
Our proven model does not conclusively show that Gogo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 9 cents per share.
Zacks Rank: Gogo carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies which, as our model shows, have the right combination of elements to post an earnings beat this quarter:
Amtech Systems Inc. ASYS, with an Earnings ESP of +8.00% and a Zacks Rank #3.
SunEdison Inc. SUNE, with an Earnings ESP of +13.33% and a Zacks Rank #3.
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