Will Cable ONE (CABO) Stock Disappoint This Earnings Season?

Cable ONE Inc. (NYSE:CABO) is slated to report first-quarter 2017 results on May 4, before the market opens.

Over the past three months, shares of Cable ONE gained 6.9% while the Zacks categorized Cable Television industry marked growth of 5.9%.

Last quarter, the company posted a negative earnings surprise of 1.86%. However, the company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, with an average beat of 4.73%.

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

Factors at Play

Based in Phoenix, US, Cable ONE is among the top 10 cable companies in the U.S., serving more than 700,000 residential and commercial customers in 19 Western, Midwestern, and Southern states. As of Dec 31, 2016, it served 513,908 data customers, 320,246 video customers and 115,811 voice customers. The company provides a wide range of products and services that include wireless Internet service, high-definition programming and phone service with free, unlimited long-distance calling in the continental U.S.

Cable ONE made major changes in its channels and their availability to customers. New lineups were implemented to make news, sports and other channels easily accessible to viewers. We are also impressed with the company’s efforts to reward shareholders with a quarterly cash dividend of $1.50 per share. The dividend was paid on Mar 10, to stockholders of record at the close of business on Feb 21.

The company’s failure to sign a retransmission consent deal with Northwest Broadcasting took the latter’s channels off from its portfolio. Moreover, being a cable TV company, Cable ONE faces immense competition from leading cable multi-service-operators (MSO) like Comcast Corp. (NASDAQ:CMCSA) and Charter Communications Inc. (NASDAQ:CHTR) . These are likely to be the major dampeners to the company’s earnings.

Earnings Whispers

Our proven model does not conclusively show that Cable ONE 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Cable ONE has an Earnings ESP of -10.64%. This is because the Most Accurate estimate stands at $4.87 while the Zacks Consensus Estimate is pegged higher at $5.45. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cable ONE has a Zacks Rank #1 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

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

Key Pick

Here is a company from the Zacks-categorized broader Consumer Discretionary sector — which houses Cable ONE — that has the right combination of elements to post an earnings beat this quarter.

AMC Networks Inc. (NASDAQ:AMCX) is set to release first-quarter 2017 results on May 4. The company has an Earnings ESP of +1.02% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMC Networks’ earnings surpassed the Zacks Consensus Estimate only in the last reported quarter.

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