Netflix Inc. NFLX is set to report fourth-quarter 2017 results on Jan 22. The company has beaten the Zack Consensus Estimate twice in the past four quarters, delivering an average positive surprise of 1.25%.
Last quarter, the company reported earnings of 29 cents per share, which missed the Zacks Consensus Estimate of 32 cents, but increased 141.7% year over year. Revenues increased 30.3% year over year to $2.985 billion and beat the consensus estimate of $2.973 billion. Subscriber growth primarily helped Netflix generate significant revenues.
For the fourth-quarter of 2017, the Zacks Consensus Estimate for Netflix’s earnings per share and total revenues are pegged at 41 cents and $3.259 billion, respectively, representing year-over-year increase of 173.3% and 31.5%.
Notably, shares of Netflix have gained 66.7% in the past year, significantly outperforming the industry’s 19.2% rally.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Netflix has been drawing strength from its growing portfolio of original content. The company had a very strong programming slate in the fourth quarter, given the new seasons of popular shows like Stranger Things and The Crown. Its new original German series, Dark also garnered positive reviews.
Per Nielsen data, which was quoted by Bloomberg, the movie Bright released in December and attracted 11 million views in the first three days of release. We believe all these will translate into an increase in subscribers. In October, the company announced that it had over 109 million subscribers globally.
Netflix has also been ramping up its efforts to boost regional programming. This is expected to expand its international presence as the domestic market approaches saturation.
We believe the strength of its content portfolio will drive subscriber growth across the globe. Per the latest report by SensorTower, Netflix topped the list of overall non-game apps by revenues across Apple’s App Store and Google’s Play Store in 2017.
However, high costs that accompany the company’s rapid international expansion and production of original content might weigh on the bottom line.
Netflix, Inc. Price and EPS Surprise
Netflix, Inc. Price and EPS Surprise | Netflix, Inc. Quote
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Netflix has a Zacks Rank #3 but its Earnings ESP is -2.74%. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.
Stocks That Warrant a Look
Here are a few companies that you may also want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:
Shutterfly Inc. SFLY has an Earnings ESP of +1.15% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks Rank #1 stocks here.
Applied Materials Inc. AMAT has an Earnings ESP of +0.57% and carries a Zacks Rank #2.
Seagate Technology PLC STX has an Earnings ESP of +2.51% and carries a Zacks Rank #2.
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