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Will Cable ONE (CABO) Spring a Surprise in Q2 Earnings?

Cable ONE Inc. CABO is slated to report second-quarter 2017 results on Aug 8, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 3.20%. However, the company’s earnings missed the Zacks Consensus Estimate in two of the previous four quarters, with an average miss of 5.80%.

Over the past three months, shares of Cable ONE have increased 12.76% while the industry to which it belongs gained 1.98%.

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

Factors at Play

Based in Phoenix, AZ, Cable ONE is among the top 10 cable companies in the U.S., serving more than 800,000 residential and commercial customers in 21 states with high-speed internet, cable television and telephone service. As of Dec 31, 2016, it served 513,908 data customers, 320,246 video customers and 115,811 voice customers. The company provides consumers with a wide range of latest products and services, including wireless internet service, high-definition programming and phone service with free, unlimited long-distance calling in the continental U.S.

Cable ONE made major changes in its channels and their availability to customers. New lineups were implemented to make news, sports and other channels easily accessible to viewers. We are also impressed with the company’s efforts to reward shareholders with a quarterly cash dividend of $1.75 per share, marking an increase of 25 cents per share in the company’s quarterly cash dividend. The dividend will be paid on Sep 1 to stockholders of record at the closure of business on Aug 15.  

The acquisition of NewWave Communications (a cable operator providing high-speed data, video and voice services) will create a leading high-speed data and cable company serving more than 1.2 million primary service units in 21 states. The deal will aid Cable ONE to expand its footprint into additional non-metropolitan markets and non-urban areas like Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas, for which the company has optimized its strategy and operations.

On the other hand, we are concerned about the company’s operation in a saturated and competitive multi-channel U.S. video market. Moreover, cable companies continue to face stiff competition from online video streaming service providers such as Netflix Inc. NFLX, Hulu.com, YouTube etc. because of their cheap source of TV programming. Furthermore, gaining customers from competitors is a difficult task as most pay-TV operators are offering innovative packages.

Moreover, being a US cable TV company, Cable ONE faces immense competition from leading cable multi-service-operators (MSO) like Comcast Corp. CMCSA and Charter Communications Inc. CHTR. This is likely to act as a major dampener to the company’s earnings.

Earnings Whispers

Our proven model does not conclusively show that Cable ONE 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: Cable ONE has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $5.10. You can uncover the best stocks to buy or sell before they’re reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.

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

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.

Cable One, Inc. Price and EPS Surprise

 

Cable One, Inc. Price and EPS Surprise | Cable One, Inc. Quote

Key Pick

Here is a company from the broader Consumer Discretionary sector — which houses Cable ONE— that has the right combination of elements to post an earnings beat this quarter.

Norwegian Cruise Line Holdings Ltd. NCLH will report second-quarter 2017 financial results on Aug 8. The company has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank stocks here.

The company has surpassed earnings estimates in the last reported quarter.

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