) to beat expectations when it reports fourth quarter 2013
results on Jan 29, 2014. The company posted a 30.8% positive
surprise in the last quarter. Moreover, Facebook has posted an
average positive earnings surprise of 17.4% over the past four
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Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Facebook is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP:
Earnings Surprise Prediction or ESP, which represents the
difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at 9.52%. This is very meaningful and a
leading indicator of a likely positive earnings surprise for
Zacks #3 Rank (Neutral):
Note that stocks with Zacks Ranks of #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of Facebook's Zacks Rank #3 (Hold) and 9.52% ESP
makes us very confident in looking for a positive earnings beat
on January 29.
What's Driving the Better-Than-Expected
Facebook continues to bolster the bottom line as it had
successfully managed to beat the earnings estimate in three out
of the last four quarters.
Although Facebook fatigue among teenagers is a concern for the
company, we believe that its decision to allow teenage users to
make public posts is a positive step. Moreover, the company
continues to gain market share in the mobile advertisement
segment, which is a key growth catalyst.
Nevertheless, stiff competition from
), Snapchat and Tumblr seems to pose an impediment for growth in
the near future.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post
an earnings beat this quarter:
), earnings ESP of +7.09% and a Zacks Rank #1 (Strong Buy).
On Semiconductor Corp.
), earnings ESP of +14.29% and a Zacks Rank #2 (Buy).
Multimedia Games Holding Co.
), earnings ESP of +10.35% and Zacks Rank #2.