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What's in the Cards for Gogo this Earnings Season?

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In-flight connectivity provider, Gogo Inc.GOGO is slated to release third-quarter 2015 results on Nov 5, before the opening bell.

Last quarter, Gogo delivered a negative earnings surprise of 3.23%. However, the company has posted an average earnings surprise of 2.30% over the past four quarters. 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. Recently, the company announced Gogo Biz 4G connectivity solutions for business aircraft passengers. Gogo Biz 4G will be available from 2017. Earlier, the company clinched a lucrative deal from South American airlines GOL for its 2Ku services as well its new product IPTV for the entire fleet. GOL has over 140 aircraft.

2Ku is Gogo's next generation satellite technology, which can offer peak speeds of over 70 Mbps to the aircraft, which is nearly 20 times the bandwidth provided by its first generation Air to Ground solution in the U.S. With ATG getting highly congested, Gogo is trying to divert traffic to its 2Ku based satellite service.

Gogo believes 2ku is the best connectivity solution in the aviations industry as it "wins on four key factors: cost, coverage, capacity and reliability". In total, Gogo now has 500 airplanes across four airlines for 2Ku facility and is carrying out trials with three other airlines.

However, higher operating expenses due to increased investment in the Commercial Aviation - Rest of World (CA-ROW) segment remain a concern. Higher spending in CA-ROW includes the cost of clearing heightened regulatory requirements for bird strike, higher number of aircraft configurations and receiving Supplemental Type Certificates (STC) for the rollout of its satellite connectivity solutions.

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, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP : Gogo's Earnings ESP is -10.81%. This is because the Most Accurate estimate stands at a loss of 41 cents while the Zacks Consensus Estimate stands at a loss of 37 cents per share.

Zacks Rank: Gogo carries a Zacks Rank #3 (Hold) which when combined with a negative ESP makes surprise prediction difficult.

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

Stock to Consider

Here is a company, which, as our model shows, has the right combination of elements to post an earnings beat this quarter:

Agilent Technologies Inc. A , with an Earnings ESP of +2.13% and a Zacks Rank #2 (Buy).

Ameren Corporation AEE , with an Earnings ESP of +1.53% and a Zacks Rank #2.

Aurinia Pharmaceuticals Inc. AUPH , with an Earnings ESP of +21.74% and a Zacks Rank #2

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AMEREN CORP (AEE): Free Stock Analysis Report

AGILENT TECH (A): Free Stock Analysis Report

GOGO INC (GOGO): Free Stock Analysis Report

AURINIA PHARMA (AUPH): 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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