Can Yahoo (YHOO) Surprise This Earnings Season? - Analyst Blog

Yahoo! Inc. YHOO is set to report first-quarter 2014 results on Apr 15. Last quarter, it posted a 30.0% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Yahoo's fourth-quarter earnings exceeded the Zacks Consensus Estimate by 10 cents driven by its equity holdings in Yahoo Japan assets and a lower tax rate. Also, GAAP revenues of $1.27 billion were up sequentially as well as year over year.

Margins expanded both sequentially as well as from the year-ago quarter due to solid expense management and a favorable mix.

For the first quarter, Yahoo expects revenues within $1.12–$1.16 billion, adjusted EBITDA in the $290–$330 million range and non-GAAP operating income in the range of $130–$170 million.

Earnings Whispers?

Our proven model does not conclusively show that Yahoo will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 29 cents. Hence, the difference is 0.00%.

Zacks Rank: Yahoo has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

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

Other Stocks to Consider

You could consider other stocks with a positive Earnings ESP and a Zacks Rank #1, 2 or 3 such as:

E-Commerce China Dangdang Inc. DANG, with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

ON Semiconductor Corp. ONNN, with Earnings ESP of +6.67% and a Zacks Rank #1.

Yelp, Inc. YELP, with Earnings ESP of +33.33% and a Zacks Rank #2 (Buy).