) is set to report second quarter 2014 results on Jul 30, 2014.
Last quarter, this online photo-printing service provider posted a
positive earnings surprise of 11.8%. Let's see how things are
shaping up for this announcement.
Factors to Consider This Quarter
Shutterfly's business is seasonal in nature and the company
generally posts losses in the first three quarters of the year.
In the second quarter, the company expects to post loss per share
in the range of 65 cents to 68 cents per share, higher than 29
cents recorded in the comparable period last year. Apart from
seasonality, termination of the Costco partnership in 2013, higher
expenses and lower demand have been hurting the company's results.
Besides this, depreciation, labor, and equipment costs for
expansion and acquisition of manufacturing facilities are also
adversely impacting profitability.
Moreover, the company faces stiff competition from big players such
as Google Inc. and Facebook, Inc. who have been acquiring companies
in the technology and Internet space. These companies have better
and effective resources to leverage these acquisitions and would
eventually eat into Shutterfly's market share.
Huge losses have compelled the company to look for a buyer for
itself. Shutterfly has hired boutique investment bank Qatalyst
Partners LLC for the same. Private-equity firms as well as
e-commerce and web storage companies are expected to bid for the
company. However, the company is in the early stages of seeking a
buyer and might not reach a transaction.
Our proven model does not conclusively show that Shutterfly will
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Negative Zacks ESP:
Shutterfly's ESP is -1.35% since the Most Accurate estimate
stands at a loss of 75 cents per share, while the Zacks Consensus
Estimate is pegged at a loss of 74 cents.
Zacks Rank #3 (Hold):
Shutterfly's Zacks Rank #3 when combined with a negative earnings
ESP makes surprise prediction difficult.
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 momentum.
Other Stocks to Consider
Other stocks in the Internet content and computer and technology
sector that have both a positive earnings ESP and a favorable Zacks
Angie's List, Inc. (
), with Earnings ESP of +33.3% and a Zacks Rank #3.
Baidu, Inc. (
), with Earnings ESP of +8.80% and a Zacks Rank #2 (Buy).
iGATE Corporation (
), with Earnings ESP of +1.92% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
BAIDU INC (BIDU): Free Stock Analysis Report
SHUTTERFLY INC (SFLY): Free Stock Analysis
IGATE CORP (IGTE): Free Stock Analysis Report
ANGIES LIST INC (ANGI): Free Stock Analysis
To read this article on Zacks.com click here.