3 Telecom Stocks Calling for an Earnings Beat - Earnings ESP

The telecommunications industry is identified as a major driver of global economic recovery. Robust growth in high-speed mobile Internet traffic, especially for wireless data and video, has radically altered the industry into the most evolving, inventive, and keenly contested space. Moreover, the advent of wireless broadband technology has opened up several service areas with substantial opportunities.

The GSM Association's research wing, GMSA Intelligence, recently predicted the establishment of over 1 billion LTE global connections by 2017. Currently, there are approximately 200 million LTE links worldwide.

With the first-quarter results underway, we remain optimistic about some earnings surprises in the Telecommunication space.

Currently, the U.S. Telecommunications industry is evolving around 5 broad factors. These include the growing popularity of wireless, which is gradually becoming the future of the industry, and the consequent popularity of spectrum. High-speed fiber-based network is projected to expand more aggressively, especially for video/TV offerings.

In addition, consolidation within the industry will continue mainly due to shortage of airwaves and attainment of economies of scale. Innovative products are likely to be launched in areas of m-Commerce, virtualization and cloud-based technology, high-speed metro Ethernet, to name a few. Apart from these, there still remains ample scope for expansion in the U.S.  According to the Federal Communications Commission, nearly a fifth of rural American households lack broadband access.

In such a scenario, it might be a good idea to bet on a handful of telecom stocks that are poised to beat earnings estimates this quarter. An earnings surprise should help these stocks outperform in the near term.

With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings estimates could appear to be a difficult task, but our proprietary methodology makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive

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Earnings ESP is our proprietary methodology for determining stocks having the best chance to surprise with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of positive earnings surprise is as high as 70%.

For investors seeking to benefit by applying this strategy to their portfolios, here are three telecom stocks that have the right combination of elements to post an earnings beat this quarter:

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): DIRECTV provides advanced communication services and develops a broad range of entertainment, information and communication services for home and business use, including video, data, voice, multimedia and Internet services.

The Zacks Consensus Estimates for first-quarter 2014 is pegged at $1.49, representing robust growth over the year-ago quarter. The company registered an average earnings surprise of 9.02% over the trailing 12 months. DIRECTV presently carries a Zacks Rank #3 and has an earnings ESP of +1.34%.

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: DigitalGlobe, Inc. is a global provider of commercial high-resolution earth imagery products and services. The company's products include DigitalGlobe System, QuickBird satellite, ImageAtlas and GlobeXplorer.

The company delivered an average earnings surprise of 125.75% over the past 12 months. DigitalGlobe has an Earnings ESP of +314.29% and retains a Zacks Rank #3.

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:  RigNet, Inc is engaged in providing data network infrastructure serving the remote communications needs of the oil and gas industry. The company delivers voice, data, video and other value-added services such as real-time management services through an Internet Protocol/Multiprotocol Label Switching, or IP/MPLS, global network.

Currently, the Zacks Consensus Estimate for the company's first-quarter 2014 is pegged at 27 cents, with growth expectation of 22.7% from the prior-year quarter. The company boasts an average earnings surprise of 13.27% over the trailing 12 months. RigNet currently holds a Zacks Rank #3 and has an earnings ESP of +11.11%.

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