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Is Facebook (FB) Poised to Beat Earnings Estimates?

Zacks Equity Research

We expect Facebook (FB) to beat expectations when it reports fourth quarter 2013 results on Jan 29, 2014. The company posted a 30.8% positive surprise in the last quarter. Moreover, Facebook has posted an average positive earnings surprise of 17.4% over the past four quarters.  

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

Why a Likely Positive Surprise?

Our proven model shows that Facebook is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 9.52%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #3 Rank (Neutral): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Facebook’s Zacks Rank #3 (Hold) and 9.52% ESP makes us very confident in looking for a positive earnings beat on January 29.

What's Driving the Better-Than-Expected Earnings?

Facebook continues to bolster the bottom line as it had successfully managed to beat the earnings estimate in three out of the last four quarters.

Although Facebook fatigue among teenagers is a concern for the company, we believe that its decision to allow teenage users to make public posts is a positive step. Moreover, the company continues to gain market share in the mobile advertisement segment, which is a key growth catalyst.

Nevertheless, stiff competition from Twitter (TWTR), Google (GOOG), Snapchat and Tumblr seems to pose an impediment for growth in the near future.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Baidu Inc. (BIDU), earnings ESP of +7.09% and a Zacks Rank #1 (Strong Buy).

On Semiconductor Corp. (ONNN), earnings ESP of +14.29% and a Zacks Rank #2 (Buy).

Multimedia Games Holding Co. (MGAM), earnings ESP of +10.35% and Zacks Rank #2.

Read the Full Research Report on FB
Read the Full Research Report on BIDU
Read the Full Research Report on GOOG
Read the Full Research Report on ONNN
Read the Full Research Report on MGAM
Read the Full Research Report on TWTR

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