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Is Novatel Wireless (NVTL) Poised to Beat Earnings Estimates?

Zacks Equity Research

Novatel Wireless Inc. (NVTL) is scheduled to report fourth-quarter 2013 results after the closing bell on Mar 6, 2014.

In the last quarter, the company delivered a 50.0% positive earnings surprise. We will briefly discuss those factors which will influence the earnings results.

Factors to Influence This Quarter

Increased demand for mobile broadband will boost Novatel’s performance in this quarter. The company currently serves the three large wireless operators in the U.S., namely, Verizon Wireless, AT&T and Sprint.

Novatel completed the acquisition of Enfora, a machine-to-machine (M2M) intelligent asset management solutions provider. Enfora has a long list of clientele including several enterprises, applications service providers, original equipment manufacturers (OEMs) and distributors. This acquisition will strengthen Novatel’s position in the fast growing M2M markets.

However, we anticipate increasing competition for Novatel’s MiFi product line which may hamper the company’s results in the coming quarters. Some of the latest smartphones offer inbuilt WiFi. Also, low-cost Asian manufacturers, including ZTE and Huawei Technologies, have launched their own version of intelligent mobile hot spots, creating competitive pressure on Novatel.

Earnings Whispers

Our proven model does not conclusively show that Novatel Wireless 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, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

Zero Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at a loss of $0.15. Hence, the ESP is 0.00%.

Zacks Rank #3 (Hold): Novatel Wireless' Zacks Rank #3 decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of 0.00% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Nokia Corporation (NOK) with earnings ESP of +25.00% and Zacks Rank #3.

InterDigital, Inc. (IDCC) with earnings ESP of +5.88% and Zacks Rank #3.

BlackBerry Limited (BBRY) with earnings ESP of +3.57% and Zacks Rank #3.

Read the Full Research Report on NVTL
Read the Full Research Report on NOK
Read the Full Research Report on IDCC
Read the Full Research Report on BBRY

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