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Liberty Media (LMCA) Q1 Earnings: Stock to Pull a Surprise?

Liberty Media Corporation LMCA is slated to release first-quarter 2016 earnings on May 9, before the market opens.

Last quarter, the company reported earnings in line with the Zacks Consensus Estimate.  Let’s see how things are shaping up ahead of this announcement.

Factors Likely to Influence this Quarter

Liberty Media holds a 27.3% stake in Charter Communications Inc. CHTR and stands to gain significantly from the investment. Notably, Charter Communications is awaiting a Federal Communications Commission (FCC) approval for the Time Warner Cable Inc. TWC acquisition, which will position the company as the second-largest cable Multi Service Operator (MSO) in the U.S. after Comcast. Notably, Charter Communications’ shareholders have sanctioned Liberty Media’s impending buyouts of Time Warner Cable and Bright House. The deals are likely to benefit Charter Communications in terms of geographic expansion and operating cost synergies, which in turn, will boost its bottom line and free cash flow.

On the flip side, Liberty Media’s businesses are susceptible to rapid technological changes. Large cable TV operators are increasingly deploying digital TV networks, which is enabling them to gain significant market traction. This may hurt the channel positioning of Liberty Media’s networks. Moreover, increasing deployment of personal video recorders, video-on-demand technology and IPTV network are systematically changing the distribution and viewing habits of common people.

Earnings Whispers

Our proven model does not conclusively show that Liberty Media 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: Liberty Media has Earnings ESP of -6.67%. This is because the Most Accurate estimate stands at 14 cents while the Zacks Consensus Estimate stands at 15 cents.

Zacks Rank: Liberty Media has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.

Note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.    

A Stock to Consider

Here is a company you may want to consider, as our model shows it has the right combination of elements to post an earnings beat this quarter:

Asure Software, Inc. ASUR, with Earnings ESP of +200.00% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ASURE SOFTWARE (ASUR): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
CHARTER COMM-A (CHTR): Free Stock Analysis Report
LIBERTY MEDIA-A (LMCA): Free Stock Analysis Report
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