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Zayo (ZAYO) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Zayo Group Holdings, Inc. ZAYO is scheduled to report fourth-quarter fiscal 2019 results on Aug 21, after the closing bell. In the last reported quarter, the company delivered a negative earnings surprise of 16.7%.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

Zayo is poised to benefit from a diversified blue-chip customer base that comprises the largest and most sophisticated users of bandwidth. Its extensive network footprint, product portfolio and ability to penetrate in different markets are laudable. The company’s zColo portfolio comprises 51 data centers in more than 30 markets.

During the June quarter, Zayo was selected by a global infrastructure as a service provider for space and power in a zColo East Coast data center. This avant-garde solution, which has nearly 2,000 square feet of space and multiple hundreds of kilowatts of power, is an extension of one of the company’s facilities in the Southwest.

Zayo augmented its presence in Ohio with the expansion of its fiber network infrastructure in the region. The move has enabled the company to provide high-quality connectivity in order to support the seamless transition of enterprise and mobile carrier customers to 5G technology.

Despite these positives, the Zacks Consensus Estimate for total revenues stands at $647 million for the fiscal fourth quarter. Revenues of $658 million were reported in the year-earlier quarter. Adjusted earnings per share are pegged at 15 cents. The company posted earnings of 18 cents a year ago.

What Our Model Says

Our proven model does not conclusively show that Zayo is likely to beat earnings this quarter as it does not possess one of the two 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’ll see below:

Earnings ESP: Zayo’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 15 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zayo Group Holdings, Inc. Price and EPS Surprise


Zayo Group Holdings, Inc. Price and EPS Surprise

Zayo Group Holdings, Inc. price-eps-surprise | Zayo Group Holdings, Inc. Quote

Zacks Rank: Zayo currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

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:

Bank of Montreal BMO, with an Earnings ESP of +0.27% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Cooper Companies, Inc. COO with an Earnings ESP of +1.50% and a Zacks Rank #2.  

Burlington Stores, Inc. BURL with an Earnings ESP of +1.13% and a Zacks Rank #2.

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