Demand Media Inc. DMD is set to report fourth-quarter 20Array5 results on Mar Array. Last quarter, the company posted a loss of 35 cents per share, narrower than the Zacks Consensus Estimate of a loss of 48 cents.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Headquartered in Santa Monica, CA, Demand Media operates as a media company offering two distinct but complementary services: Content & Media and Registrar. The company uses Internet-based model to identify, create, distribute and monetize in-demand, long-lived content. It deploys its proprietary Content & Media platform both to Demand Media’s owned and operated websites. The company’s Registrar as a wholesaler, provides domain name registration services and value-added services to active resellers, including small businesses, large e-Commerce websites, Internet service providers and web-hosting companies.
Demand Media reported tepid third-quarter results. Revenues declined on a year-over-year basis, primarily due to lower revenues from Content & Media.
Going forward, declining desktop traffic and the company’s shift from direct display advertising to lower margin Marketplaces revenues are likely to hurt margins. Moreover, decline in traffic in eHow and the impact of divesting CoveritLive and Pluck social media businesses are expected to affect the company’s results.
Nonetheless, revenue addition from the Saatchi Art acquisition would support the company’s top line.
Earnings Whispers
Our proven model does not conclusively show that Demand Media is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), 2 (Buy) or 3 (Hold) 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 a loss of 34 cents per share. Hence, the difference is 0.00%.
Zacks Rank: Demand Media currently has a Zacks Rank #3 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 negative estimate revisions momentum.
Stocks to Consider
Here are a few stocks which you may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Zumiez Inc. ZUMZ, with an Earnings ESP of +2.08% and a Zacks Rank #2.
The Kroger Co. KR, with an Earnings ESP of +Array.85% and a Zacks Rank #2.
Abercrombie & Fitch Co. ANF, with an Earnings ESP of +5.2Array% and a Zacks Rank #3.
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