Zynga (ZNGA) Q1 Earnings: What's in the Cards this Time?

Zynga Inc. ZNGA is set to report first-quarter 2016 results on May 4. Last quarter, the company delivered a positive earnings surprise of 50%. On an average, Zynga has delivered a positive earnings surprise of 40.48% over the last four quarters.

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

Factors at Play

Zynga has been benefiting from the strength in the mobile game market. In addition, its cost cutting initiatives and its ongoing share repurchase program are also positives.

We expect the top line to be driven by its popular games likeSlots, Words With Friends and Poker.

However, a slowing web business, delay in new game releases along with intensifying competition from the likes of Glu Mobile GLUU and Electronic Arts EA remain concerns.

For the first quarter of 2016, the company expects revenues in a range of $160–$175 million.

Earnings Whispers

Our proven model does not conclusively show that Zynga is likely to beat estimates 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: Zynga has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 5 cents.

Zacks Rank: Zynga has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

Here's a stock worth considering that, as per our model, has the right combination of elements to post an earnings beat this quarter:

Enable Midstream Partners, LP ENBL has an Earnings ESP of +21.05% and a Zacks Rank #2.

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