Will Facebook (FB) Miss Earnings Estimates? - Analyst Blog

Facebook, Inc. FB is set to report first quarter 2014 results on Apr 23. Last quarter, it posted a 4.76% negative surprise. However, it is noteworthy that Facebook has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 20.7%.

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

Growth Factors this Past Quarter

We believe Facebook's growing mobile user base (more than 1 billion), Instagram's increasing popularity (200 million users) and international expansions will boost the top line going forward. This will also help it to combat intensifying competition from the likes of Google and Twitter TWTR going forward.

Further, Facebook's continuous product updates are expected to drive growth and profitability going forward. Reportedly, the company is set to step into the mobile payments business segment. This may also prove to be a positive catalyst going forward.

Facebook's Internet.org initiative will help it to expand presence in emerging countries like India and Brazil. Moreover, we believe that Facebook's recent acquisitions which include the likes of Whatsapp and Oculus VR are the major long term growth drivers.

Earnings Whispers?

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

Negative Zacks ESP:  That is because the Most Accurate estimate stands at 14 cents while the Zacks Consensus Estimate is higher at 18 cents. That is a difference of -22.2%.
 
Zacks Rank #2 (Buy): Facebook's Zacks Rank #2 when combined with a negative ESP makes surprise prediction difficult.

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

Other Stocks to Consider    

Here is another company which you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:  

On Semiconductor Corp. ONNN, Earnings ESP of +6.67% and Zacks Rank #1  (Strong Buy)

Yelp, Inc. YELP, Earnings ESP of +33.3% and Zacks Rank # 2 (Buy)