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Will NII Holdings (NIHD) Disappoint this Earnings Season?

Zacks Equity Research

Latin American telecom operator NII Holdings Inc. (NIHD) is scheduled to report its second-quarter 2014 financial numbers after the closing bell on Aug 11.

In the previous quarter, the company’s earnings came in line with the Zacks Consensus Estimate. Let’s see how NII Holdings is positioned prior to the second-quarter earnings announcement.

Factors to be Considered this Quarter

Higher churn, weaker exchange rate, lower average revenue per user (:ARPU), increase in operating expenses, stiff competition in the Latin American markets and a higher interest expenses may act as headwinds for the company in the coming quarters. In first-quarter 2014,NII Holdings lost 52,000 subscribers against a gain of 111,800 subscribers in the prior-year quarter. The customer churn was attributable to significant subscriber loss in Mexico. We not expect the situation to improve much in the second quarter as well.

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Earnings Whispers?

Our proven model does not conclusively show that NII Holdingsis likely to beat earnings 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, this is not the case here as elaborated below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are poised at a loss of $2.39. Hence, the ESP is 0.00%.

Zacks Rank: NII Holdings’ Zacks Rank #4 (Sell) further decreases the predictive power of ESP.

We caution investors against the stock as Sell-rated stocks (#4 and 5) should ideally never be considered going into an earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

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

CatchMark Timber Trust, Inc. (CTT) with earnings ESP of +50.00% and a Zacks Rank #2.

Infosys Ltd. (INFY) with earnings ESP of +1.24% and a Zacks Rank #2.

Computer Sciences Corporation (CSC) with earnings ESP of +0.95% and a Zacks Rank #3.

Read the Full Research Report on INFY
Read the Full Research Report on NIHD
Read the Full Research Report on CSC
Read the Full Research Report on CTT


Zacks Investment Research