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Will Liberty Global (LBTYA) Surprise this Earnings Season?

Zacks Equity Research

Liberty Global plc. LBTYA, a leading cable TV operator in Europe and Latin America, is scheduled to report first-quarter 2017 results on May 7, after market close.

The company’s earnings lagged the Zacks Consensus Estimate in one of the previous four quarters and surpassed the same in another, resulting in an average miss of 670.00%.

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

Factors Likely to Influence this Quarter

We appreciate Liberty Global’s merger and acquisition plans as part of its business expansion strategies, and we look forward to seeing many more such deals. The launch of DOCSIS 3.1 network services, the 50:50 joint venture with Vodafone Group Plc. VOD in the Netherlands, the acquisition of UTV Ireland TV stations from ITV, and the takeover of Cable & Wireless are expected to drive Liberty Global’s earnings in the to-be-reported quarter.

In order to expand its cable business, Liberty Global’s agreement to acquire the cable business of Multimedia Polska S.A. and the long-term agreement with Netflix Inc. NFLX – which allowed the latter to offer its content on the cable network of the former – bode well.

Meanwhile, the price performance of Liberty Global looks depressing. Over the past three months, shares of Liberty Global declined 1.7% while the Zacks categorized Cable TV industry gained 6.2%.

Nevertheless, Liberty Global’s predominant operation in Europe is a major concern because of the prevalence of recessionary pressure, debt crisis and low per capita income in several European countries. Additionally, the markets for video, broadband, fixed-line telephony and mobile services are highly competitive and fast evolving with technological advancements and innovation. Hence, to keep pace with changing dynamics, the company has to bear the related expenses of launching the latest technologies.

Liberty Global’s top line and EBITDA growth may become volatile in the near future, or may be hurt by the maturing Western European operations that account for the majority of the company’s total revenue.

Further, owing to its presence in 14 countries outside U.S., the company remains exposed to foreign exchange rate risks. Moreover, the company’s recent acquisitions may certainly give rise to integration risks.

Earnings Whispers

Our proven model does not conclusively show that Liberty Global is likely to beat the Zacks Consensus Estimate 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Liberty Global has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Zacks Rank: Liberty Global has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Liberty Global PLC Price and EPS Surprise


Liberty Global PLC Price and EPS Surprise | Liberty Global PLC Quote

Stock to Consider

Here is a company from the Zacks-categorized broader Consumer Discretionary sector — which houses Liberty Global — that has the right combination of elements to post an earnings beat this quarter.

AMC Networks Inc. AMCX is set to release first-quarter 2017 results on May 4. The company has an Earnings ESP of +1.02% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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