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Pandora Media (P) to Report Q4 Earnings: What's in Store?

Pandora Media Inc. P is set to report fourth-quarter 2017 results on Feb 21. The company beat the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive surprise of 22.8%.

Last quarter, Pandora incurred adjusted loss per share of 6 cents, narrower than the Zacks Consensus Estimate of a loss of 7 cents per share.
Revenues increased 7.6% year over year to $378.6 million but missed the Zacks Consensus Estimate of $383 million.

Notably, the company has underperformed the industry in the past year. While the industry gained 19.7%, Pandora lost 62% over the same time frame.

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

Factors at Play

Pandora operates in a highly competitive market with players like Spotify, Tidal and Amazon. Moreover, the company is a late entrant in the on-demand music services arena, which boasts big names like Spotify and Apple AAPL. Notably, Apple Music has been recording phenomenal growth.

We note that Pandora has been facing a decline in active users and total listener hours over the last few quarters. For the fourth quarter, the Zacks Consensus Estimate for total listener hours is 5.16 billion, which indicates decline of 4.1% from the reported number in the year-ago quarter. Active listeners are expected to decline 7.4% to 75 million from the figure reported in the year-ago quarter.

Advertising revenues, the primary contributor to revenues, are likely to be impacted by a decline in user base. However, late in the quarter, the company introduced an option by which users can access on-demand music by viewing a video ad, which is a positive.

Launch of Pandora Premium in 2017 is helping the company boost its subscription revenues. For the fourth quarter, the Zacks Consensus Estimate is pegged at $91 million, indicating growth of 51% year over year.

However, decline in advertising revenues will remain a dampener. The Zacks Consensus Estimate for total revenues is pegged at $375 million, indicating a 4.6% drop from the figure reported in the prior-year quarter.

Pandora has also been struggling to earn profits due to rising costs related to licensing, continuing expansion and higher operating expenses.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pandora has an Earnings ESP of +2.48% but a Zacks Rank #4. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.

Stocks With a Favorable Combination

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Castlight Health CSLT has an Earnings ESP of +7.69% and a Zacks Rank #3. You can see the the complete list of today’s Zacks #1 Rank stocks here.

MINDBODY MB has an Earnings ESP of +50.00% and a Zacks Rank #3.

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