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What's in the Cards for Gogo Inc (GOGO) in Q4 Earnings?

Gogo Inc. (GOGO) is set to report fourth-quarter 2016 results on Feb 27. Last quarter, Gogo delivered a positive earnings surprise of 6.67%. Also, the company has posted an average positive earnings surprise of 11.47% over the past four quarters.

However, we note that Gogo has underperformed the Zacks categorized Wireless National industry in the last one year. The company's shares have lost 10.00% compared as against the industry's gain of 12.25% during the period.

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

Factors at Play

Gogo boasts a dominant position among in-flight Wi-Fi service providers especially in its North America Commercial Aviation business. Also, Gogo's onboard Internet connectivity services coupled with its innovative value-added services are likely to drive the top line going ahead. Its partnership T-Mobile is an added positive.

The company's 2Ku service is gaining traction and can become a key growth driver going ahead. 2Ku is Gogo's next generation satellite technology, which can offer peak speeds of over 70 Mbps to the aircraft, 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.

Reportedly, Gogo is upgrading to new modems in the beginning of 2017, which is likely to boost performance of both its 2Ku and Ku global satellite services, increasing its reliability and output. This is a big positive in our view.

However, despite its strength, Gogo's business is not immune to competition and the resultant pricing pressure from peers like ViaSat Inc. VSAT . In addition, higher operating expenses due to increased investment in the Commercial Aviation - Rest of World segment remain a concern.

Gogo Inc. Price and Consensus

Gogo Inc. Price and Consensus | Gogo Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Gogo 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. That is not the case here as you will see below:

Zacks ESP: Earnings ESP for Gogo is +4.35%. This is because the Most Accurate estimate is pegged at a loss of 44 cents per share while the Zacks Consensus Estimate stands at a loss of 46 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

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

Stocks That Warrant a Look

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

ExlService Holdings Inc. EXLS with an Earnings ESP of +3.85% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

The Priceline Group Inc. PCLN with an Earnings ESP of +3.47% and a Zacks Rank #3.

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The Priceline Group Inc. (PCLN): Free Stock Analysis Report

ViaSat, Inc. (VSAT): Free Stock Analysis Report

ExlService Holdings, Inc. (EXLS): 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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