) is set to report its fourth quarter 2012 results on Jan 23. In
the prior quarter, the company posted a staggering 160% positive
surprise. Let's see how things are shaping up for this video
Growth Factors This Past Quarter
Despite posting a year-over-year increase in the top line,
primarily boosted by new subscriber additions; higher costs and
margin contractions kept the lid on the company's earnings. Lower
contribution from the DVD business and loss from the
international business were also a drag on its margins.
Moreover, management hinted that international losses could
increase due to escalation of costs related to content additions
and incremental marketing expenses. The recent expansion to the
Nordics (Denmark, Norway, Finland and Sweden) is also expected to
increase expenses, which in turn could result in the company
reporting a fourth-quarter loss.
The Zacks Consensus Estimate for the fourth quarter stands at
a loss of 12 cents while that for fiscal 2012 stands at 4
Netflix has surpassed estimates in all the preceding four
quarters, with a trailing four-quarter average positive surprise
of 109.8%. The most significant surprise was 175.0% in the second
quarter of 2012.
Estimate revisions have been minimal in the last 30 days, with
one upward estimate revision in the past 60 days. As a result,
the Zacks Consensus Estimate has remained unchanged for the
fourth quarter as well as for 2012. Over the last 60 days, the
Zacks Consensus has remained same. For fiscal 2012, over the last
60 days, the Zacks Consensus Estimate has risen by a penny to 4
The lack of downward movement in estimates signals that the
fourth quarter might not be too different from the past quarters.
Moreover, the stock carries a Zacks Rank #3 (Hold).
We caution against stocks with Zacks Ranks #4 and #5 (Sell
rated stocks) going into the earnings announcement, especially
when the company is seeing negative estimate revisions
Other Stocks to Consider
Our model states that a stock needs to have both a positive
Zacks Earnings ESP
and a Zacks Rank of #1, #2 or #3 to beat earnings estimates. You
could, however, consider stocks like:
), with Zacks Earnings ESP of 9.09% and Zacks Rank #2 (Buy),
), with Zacks Earnings ESP of 20.69% and Zacks Rank #3 (Hold) and
) with Zacks Earnings ESP of 1.89% and Zacks Rank #3 (Hold).
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