Can Top-Line Improvement Buoy Altice (ATUS) Q4 Earnings?

Altice USA, Inc. (NYSE:ATUS) is scheduled to report fourth-quarter 2018 results after market close on Feb 21. In the last reported quarter, the company delivered a positive earnings surprise of 200%. Notably, Arista surpassed the Zacks Consensus Estimate for earnings twice in the trailing four quarters, the average beat being 54.2%.

For the fourth quarter, the company is likely to report higher consolidated revenues on a year-over-year basis driven by healthy growth dynamics. Whether this could result in an earnings beat remains to be seen.

Factors to Consider

Altice is well on track with its five-year plan to build a FTTH (fiber-to-the-home) network and deploy its home communications hub. The company believes that the network will be more resilient with reduced maintenance requirements, fewer service outages and lower power usage. This will enable Altice to cater to demand for higher speed, and support evolving technologies, such as 5G. It will also allow it to capitalize on allied revenue-growth opportunities. Moreover, the company is building a next-generation fiber network to deliver broadband speed of 10 Gbps, highlighting its continual investment in technology and innovation for customers in the United States.

In addition, Altice has been rolling out enhanced data and services for its business customers. During the quarter, the company introduced the Altice One Operating System (OS) 2.0 — a version 2 upgrade to its Altice One entertainment and connectivity platform. The Altice One OS 2.0 boasts enhanced features for providing customers access to the cloud DVR from the Altice One mobile app, access to the YouTube Kids app, more 4K content and live show restart on more than 20 additional networks. The all-in-one entertainment system is likely to have generated incremental revenues for the company in the quarter.

The differentiated multi-screen advertising solutions are further driving growth beyond linear TV broadcasting advertising and have been the fastest growing business division of the company. Leveraging the superior reach of a4, advertisers can reportedly extend their content to more than 90 million households, 85% of broadband subscribers and 1 billion devices in the United States. This would significantly aid advertisers to screen their messages to target pool of audience, thereby reducing operating costs and, in turn, generate more revenues for Altice.

The Zacks Consensus Estimate for total revenues is pegged at $2,459 million. In the year-earlier quarter, the company generated revenues of $2,365 million.

Earnings Whispers

Our proven model does not show that Altice is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are is pegged at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Altice sports a Zacks Rank #1. Although this increases the predictive power of ESP, we need to have a positive ESP to make us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Live Nation Entertainment, Inc. (NYSE:LYV) is slated to release quarterly numbers on Feb 26. It has an Earnings ESP of +3.77% and a Zacks Rank #1.

CommScope Holding Company, Inc. (NASDAQ:COMM) is scheduled to release results on Feb 21. The company has an Earnings ESP of +6.05% and has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ciena Corporation (NYSE:CIEN) is slated to release quarterly numbers on Mar 5. It has an Earnings ESP of +1.70% and a Zacks Rank #3.

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