Will Liberty Interactive (QVCA) Disappoint Q3 Earnings?
Liberty Interactive Corporation (QVCA) is slated to release its third-quarter 2014 results before the opening bell on Nov 4.
Last quarter, the company had delivered a negative earnings surprise of 22.22%. Moreover, the company’s earnings have missed the Zacks Consensus Estimate in three of the last four quarters, with an average miss of 15.61%. Let’s see how things are shaping up for this announcement.
Recent Change
Liberty Interactive earlier traded on Nasdaq using the ticker symbol LINTA. However, the company changed over to QVCA effective Oct 21, 2014. Management recently realigned Liberty Interactive's businesses to create a pure play multimedia retail tracking stock that will track the performance of QVC, Inc. and Liberty Interactive's approximately 38% interest in HSN, Inc. (HSNI), as well as cash and certain liabilities. The tracking stock group formerly known as the Interactive Group is now known as the QVC Group.
Factors at Play this Quarter
QVC Inc. – a segment of Liberty Interactive – is the second largest e-commerce retailer in the U.S. Notably, QVC’s fluctuating growth rate in the last five quarters is a major concern for the company. This segment currently generates roughly 81% of the company’s total revenue and all of its operating profits. Therefore, any variation in QVC’s revenues will drastically affect the company’s overall financials.
Moreover, persistent global economic headwinds, a higher leverage ratio and stiff competition from other operators may affect the top line in the near future. On the other hand, mounting TV carriage costs may hurt margins. Furthermore, the company’s global operations expose it to volatile foreign exchange rate risks.
Earnings Whispers?
Our proven model does not conclusively show that Liberty Interactive 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.
Zacks ESP: Liberty Interactive has an earnings ESP of -5.26%. This is because the Most Accurate estimate stands at 18 cents while the Zacks Consensus Estimate is pegged higher at 19 cents.
Zacks Rank: Liberty Interactive’s Zacks Rank #3 (Hold) increases the predictive power of ESP. Nevertheless, we need to have a positive ESP to be confident of an earnings surprise.
Note that we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider instead, as our model shows these have the right combination of elements to post an earnings beat this quarter:
Ruckus Wireless, Inc. (RKUS) has an earnings ESP of +60.00% and a Zacks Rank #3.
DragonWave Inc. (DRWI) has an earnings ESP of +16.67% and a Zacks Rank #3.
Read the Full Research Report on DRWI
Read the Full Research Report on RKUS
Read the Full Research Report on HSNI
Read the Full Research Report on QVCA
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