Will HERO Camera Demand Aid GoPro (GPRO) Beat Earnings?

GoPro, Inc. GPRO is expected to beat expectations when it reports fourth-quarter and full year 2014 results on Feb 5.

In the prior quarter also, the company delivered a positive earnings surprise of 500%.

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

Why a Likely Positive Surprise?

Our proven model shows that GoPro is likely to beat earnings since it has the appropriate combination of two key ingredients:

Zacks ESP: The company's Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.23%. This indicates a likely positive earnings surprise.

Zacks Rank: GoPro carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings.

This combination of the company's Zacks Rank and Earnings ESP makes us confident about a positive earnings beat.

However, 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.

Key Earnings Driver

Continued solid demand of the GoPro HERO Cameras line, which is driving factor behind the prior-quarter earnings, is expected to remain the growth catalyst for this season too.

Further, the company generates a substantial portion of its revenues from video sales, which is also expected to contribute significantly to top-line growth. Notably, the company reported a 92% year-over-year increase in video views on YouTube in the third quarter.

Stocks to Consider

GoPro is not the only firm looking up this earnings season. Some other companies in the same sector having the right combination of the two key ingredients are as follows:

Arch Capital Group Ltd. ACGL has an Earnings ESP of +0.95% with a Zacks Rank #1.

Skullcandy, Inc. SKUL has an Earnings ESP of +4.17% with a Zacks Rank #1.

Century Aluminum Co. CENX has an Earnings ESP of +7.69% with a Zacks Rank #2.

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