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What's in the Offing for Gogo this Earnings Season?

Gogo Inc. GOGO is set to report second-quarter 2017 results on Aug 7. The company has beaten the Zack Consensus Estimate thrice and matched it once, delivering an average positive surprise of 14.74%.

Last quarter, the company reported a loss of 52 cents that came in line with the Zacks Consensus Estimate.  However, revenues increased 17% year over year to $165 million and beat the Zacks Consensus Estimate of $160 million.

Notably, Gogo shares have gained 39.5%, substantially outperforming the industry’s loss of 7.7%.  The outperformance can be attributed to the high adoption rate of Gogo’s 2Ku technology.



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

Factors at Play

Gogo enjoys a dominant position among in-flight Wi-Fi service providers especially in its North America Commercial Aviation business. The company’s 2Ku service has been instrumental in driving top-line growth.

In Jun 2017, Gogo announced that it has reached the target of 200 2Kus installations and expects to achieve 550 to 650 2Ku equipped aircraft by the end of the year. The company’s lower bandwidth cost structure coupled with faster installation rate is helping it to gain traction in the market. The company is also expanding overseas with the addition of K5-Aviation as its first 2Ku business aviation customer in Europe.

The company’s onboard Internet connectivity services coupled with its innovative value-added services are also likely to drive growth.

However, despite its strength, Gogo has to face stiff competition from peers like ViaSat Inc. VSAT. Higher operating expenses due to increased investment in the Commercial Aviation – Rest of World (CA-ROW) segment pose concerns.

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 deliver a positive surprise 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. This is not the case here as you will see below:

Zacks ESP: Gogo’s Earnings ESP is -4.08%. This is because the Most Accurate estimate is pegged at a loss of 51 cents while the Zacks Consensus Estimate stands at a loss of 49 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Gogo’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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.

Stocks That Warrant a Look

Here are a couple of companies that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in their upcoming release:

Broadcom AVGO with an Earnings ESP of +2.57% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International CACI with an Earnings ESP of +1.83% and a Zacks Rank #2.

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ViaSat, Inc. (VSAT): Free Stock Analysis Report
 
CACI International, Inc. (CACI): Free Stock Analysis Report
 
Broadcom Limited (AVGO): Free Stock Analysis Report
 
Gogo Inc. (GOGO): Free Stock Analysis Report
 
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