Will Competition Weigh On Gogo Inc.'s (GOGO) Q2 Earnings?

Gogo Inc. (NASDAQ:GOGO) , the prominent in-flight connectivity provider, is slated to release second-quarter 2016 results on Aug 4. Last quarter, Gogo delivered a positive earnings surprise of 20.51%. The company has posted an average positive earnings surprise of 4.89% over the past four quarters.

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

Factors to Consider

Gogo is one of the leading companies in the in-flight Wi-Fi service space,. Gogo’s onboard Internet connectivity services and its innovative value-added services are likely to drive the top line going ahead.

The company’s 2Ku service is gaining traction and can become a key growth driver going ahead. This next generation satellite technology can offer peak speeds of over 70 Mbps to the aircraft, nearly 20 times the bandwidth provided by the company’s first generation Air to Ground solution in the U.S. With ATG getting highly congested, Gogo is trying to divert traffic to its 2Ku based satellite service.

However, despite its strength, Gogo’s business is not immune to competition and the resultant pricing pressure. In Jun 2016, its rival ViaSat (NASDAQ:VSAT) won a contract to provide Wi-Fi connectivity for 100 new American Airlines planes. Gogo has so far enjoyed strong ties with American Airlines but now this contract is ringing warnings bells for investors.

Estimates for the company have gone down lately, which make us less confident of a beat this time.

GOGO INC Price and EPS Surprise

GOGO INC Price and EPS Surprise | GOGO INC Quote

Earnings Whispers

Our proven model does not conclusively show that Gogo is likely to beat estimates 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. That is not the case here, as you will see below.

Zacks ESP:Gogo's Earnings ESP is +11.91%. This is because the Most Accurate estimate of a loss of 37 cents is lower than the Zacks Consensus Estimate of a loss of 42 cents.

Zacks Rank: Gogo currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing 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:

Zoetis Inc (NYSE:ZTS) has an Earnings ESP of + 2.27% and a Zacks Rank #1.

LATAM Airlines Group S.A. (NYSE:LFL) has an earnings ESP of +166.67% and a Zacks Rank #2.