Shutterfly, Inc. SFLY is set to report first-quarter 2016 results on Apr 27, after the market closes. Last quarter, the online photo-printing service provider posted a negative earnings surprise of 0.28%. In fact, Shutterfly has surpassed earnings estimates in two of the trailing four quarters with an average positive surprise of 11.78%. Let’s see how things are shaping up for this announcement. Factors to Consider Shutterfly generally incurs loss in the first three quarters and makes a profit in the final quarter of every year because of the seasonal nature of its business. For the first quarter of 2016, the company expects loss per share in the range of 92 cents to $1.01 per share. Moreover, the costs related to Shutterfly’s expansion plans could have a negative impact on profits as depreciation and equipment costs for expansion and acquisition of manufacturing facilities will increase expenses. Moreover, the company faces stiff competition from major players such as Alphabet Inc. and Facebook, Inc. FB that have been pursuing strategic acquisitions in the technology and Internet space. These companies, with better and effective resources to leverage the buyouts, are eating into Shutterfly’s market share. Nevertheless, it is encouraging that the company has posted year-over-year net revenue growth for 60 quarters, consecutively. For the first quarter, net revenue is expected to be in the range of $173 million to $180 million, a year-over-year increase of 8.1% to 12.5%. Adjusted gross profit margin is expected within 41.5% to 42.5% of net revenue. Adjusted EBITDA loss is expected in the range of $1.8 million to $4.8 million. The company’s strategic acquisitions, improved manufacturing facilities, offerings in the growing mobile e-Commerce segment, aggressive promotions, affordable prices and easy-to-use products should boost results in the first quarter. Earnings Whispers Our proven model does not conclusively show that Shutterfly will 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. That is not the case here as you will see below. Zacks ESP: Shutterfly’s ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 97 cents per share. Zacks Rank: Shutterfly’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise. 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. Stocks to Consider Stocks worth considering in the Internet content and Internet services sector that have both a positive Earnings ESP and favorable Zacks Rank are: Yelp Inc. YELP with an Earnings ESP of +18.75% and a Zacks Rank #3. Interxion Holding NV INXN, with an Earnings ESP of +11.77% 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 SHUTTERFLY INC (SFLY): Free Stock Analysis Report INTERXION HLDG (INXN): Free Stock Analysis Report YELP INC (YELP): Free Stock Analysis Report FACEBOOK INC-A (FB): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research