Security services provider The ADT Corporation (ADT) is scheduled to report its fourth-quarter fiscal 2014 results before the market opens on Nov 12. In the last reported quarter, ADT’s adjusted earnings comfortably beat the Zacks Consensus Estimate by 9 cents. Let’s see how things are shaping up for this announcement.

Key Factors in the Fourth Quarter

During the quarter, ADT closed the acquisition of Reliance Protectron, Inc. – one of the largest security monitoring and installation companies in Canada. With the deal, ADT has strengthened its Canadian presence to better serve over 800,000 local customers with the best of products and solutions along with superior customer service in the security industry. In addition, the strategic buy will offer a steady revenue stream to ADT as Protectron reportedly has higher levels of customer retention than other major players in North America.

ADT has initiated several key initiatives to accelerate growth, improve cost efficiencies, and optimize capital structure. In order to capture a greater pie in the market, the company has invested heavily in its ADT Pulse platform and launched several new products.

ADT is also reducing customer attrition by initiating tighter credit screening policies, implementing resale efforts and customer loyalty programs. In order to reduce subscriber acquisition costs, ADT has implemented new technology and installation procedures and optimized lead management, sales conversion and marketing activities across all channels. The company’s collaboration with location-based services and family networking technology provider Life360 has added a new dimension to its expanding portfolio.

Earnings Whispers

Despite the positive trends, our proven model does not conclusively show that ADT is likely to beat earnings this quarter as it does not possess the key ingredients for a success recipe.

Zero Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%%. This indicates a likely in-line earnings.

Zacks Rank #3 (Hold): ADT’s Zacks Rank #3 combined with a zero ESP makes earnings prediction difficult. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Other Stocks to Consider

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

Zumiez, Inc. (ZUMZ), earnings ESP of +3.85% and a Zacks Rank #2.

The Kroger Co. (KR), earnings ESP of +3.28% and a Zacks Rank #2.

The Men's Wearhouse, Inc. (MW), earnings ESP of +2.30% and a Zacks Rank #3.

Read the Full Research Report on KR
Read the Full Research Report on ZUMZ
Read the Full Research Report on MW
Read the Full Research Report on ADT


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