What's in Store for Sohu.Com (SOHU) this Earnings Season?

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Sohu.Com Inc. ( SOHU ) is expected to report fourth-quarter 2016 results sometime around Feb 6, 2017. Last quarter, the company delivered a negative earnings surprise of 18.29%.

In the past year, Sohu's shares have generated a negative return of 12.52% as against the Zacks Internet Services industry's gain of 8.39%.

Let's see how things are shaping up for this announcement.

Factors at Play

The company's business has been impacted by lower online gaming and advertising sales. Specifically, its brand advertising business has remained sluggish because of lower spending levels in China.

Nonetheless, the company's strength in search and mobile businesses is a positive.Sogou continues to gain popularity and market share through increased product quality and effective marketing campaigns. The partnership with Tencent will likely improve Sogou's competitive position against market leader Baidu and Qihoo due to its strong mobile user base and further boost its mobile search traffic. 

Per media reports, Sogou might sell 10% of Sogou's shares in an IPO to be held sometime in 2017. The company apparently plans to invest the proceedings to effectively combat competition.

Sohu.com Inc. Price and EPS Surprise

Sohu.com Inc. Price and EPS Surprise | Sohu.com Inc. Quote

For the fourth quarter of 2016, Sohu expects revenues in a range of $378 million-$400 million. Management estimates brand advertising revenues in a range of $95 million to $105 million, representing 25% to 33% year-over-year decline. The company expects to generate about $42 million to $45 million revenues from Sohu Media Portal and $25 million - $28 million from Sohu Video.

Sogou revenues are expected to be in a range of $155 million to $165 million, representing 1% to 7% year-over-year decline. Online game revenues are expected in the $85 million-$95 million range, indicating a year-over-year decline of 25% to 33%.

The company expects non-GAAP loss per share to be between $2.20 and $2.45.

Earnings Whispers

Our proven model does not conclusively show that Sohu is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP:  Earnings ESP for Sohu is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of $2.40 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank:  Sohu's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Twilio Inc. TWLO with an Earnings ESP of +8.33% and a Zacks Rank #3. You can see  the complete list of today's Zacks #1 Rank stocks here .

Pandora Media, Inc. P with an Earnings ESP of +8.11% and a Zacks Rank #3.

CenturyLink, Inc. CTL with an Earnings ESP of +1.79% and a Zacks Rank #3.

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Sohu.com Inc. (SOHU): Free Stock Analysis Report

CenturyLink, Inc. (CTL): Free Stock Analysis Report

Pandora Media, Inc. (P): Free Stock Analysis Report

Twilio Inc. (TWLO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: SOHU , CTL , P , TWLO

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