Gogo Inc (GOGO) Q1 Earnings: Is a Surprise in the Cards?

Gogo Inc.GOGO is set to release its first-quarter 2017 earnings on May 4. We note that the company has delivered positive earnings surprises in each of the last four quarters resulting in an average positive surprise of 19.87%.

In the fourth quarter, the company reported a positive earnings surprise of 26.09%. Loss of 34 cents per share was narrower than the year-ago quarter loss of 43 cents. The narrower loss was primarily due to 16.1% year-over-year growth in revenues, which totaled $160 million. The figure also exceeded the Zacks Consensus Estimate of $153 million.

Gogo has installed 2Ku in more than 130 aircrafts. The company now plans to install 450 to 550 aircraft in 2017, which is higher than previous guidance of 350-450. This will further increase to 650-750 in 2018.

Gogo Inc. Price and EPS Surprise

Gogo Inc. Price and EPS Surprise | Gogo Inc. Quote

We note that the positive results have helped the stock to outperform the Zacks Wireless National industry on a year-to-date basis. While the industry lost 6.8%, the stock returned 37.1% over the same period.

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

Factors to Consider

Gogo boasts a dominant position among in-flight Wi-Fi service providers especially in its North America Commercial Aviation business. The company's 2Ku service has played a vital role in increasing revenues.

We believe that faster installation rate of 2Kus will drive overall revenue growth in the quarter. Moreover, lower costs per 2Ku installation will boost margins.

However, Gogo expects that next-generation ATG development spending will affect North America segment profitability by almost $9 million in the soon-to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Gogo is likely to beat earnings 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. That is not the case here, as you will see below.

Zacks ESP: Gogo's Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 48 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Gogo carries a Zacks Rank #2, which when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

eGain Corp EGAN with an Earnings ESP of +50% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

DragonWave DRWI with an Earnings ESP of +8.82% and a Zacks Rank #2.

Mettler-Toledo International MTD with an Earnings ESP of +0.33% and a Zacks Rank #2.

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eGain Corporation (EGAN): Free Stock Analysis Report

DragonWave Inc (DRWI): Free Stock Analysis Report

Mettler-Toledo International, Inc. (MTD): Free Stock Analysis Report

Gogo Inc. (GOGO): 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.

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

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