Netflix, Inc. (NFLX - Analyst Report) is set to report fourth quarter 2015 results on Jan 19, after the closing bell. In the last quarter, the company delivered a positive earnings surprise of 50%. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 24.17%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +50.00%. This is a meaningful and leading indicator of a likely positive surprise for the company.

Zacks Rank: Netflix carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating estimates.      

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

The combination of Netflix’s Zacks Rank #3 and +50.00% ESP makes us confident in looking for a positive surprise.

What is Driving the Better-than-Expected Earnings?

Netflix has been benefiting from its rapid international expansion along with its initiatives to improve its content especially with original series. This allows the company to both attract and retain users. In addition, the company has been leveraging the scope for growth in the international streaming market given the ongoing demand shift from traditional cable TV to subscription video on demand (SVOD).

Recently, the company expanded its services to cover about 190 countries across the globe, which will likely give a huge boost to its user base.

Furthermore, Netflix is also working to add more regional languages. In addition to the 17 languages it already caters to, the company has added Arabic, Korean and Chinese (both simplified and traditional) recently. The company had also declared that in 2016 it will be bringing out as many as 31 original series (including both new and sequels), about 24 original feature films and documentaries, 30 original kids series and even a number of stand-up comedy shows.

However, with so much going on, Netflix’s content acquisition cost have been escalating rapidly. Competition is also heating up with players like Amazon.com (AMZN - Analyst Report) and Time Warner’s (TWX - Analyst Report) HBO ramping up their efforts to get a bigger share of this pie.

Moreover, amid this competition and pricing pressure, Netflix is set to raise the price of its most popular subscription plan (by $1 a month to $9.99) for users in the U.S., Canada and some Latin American countries. The full impact of the price hike on demand can only be determined once the grace period is over.

Stock to Consider

A company that according to our model has the right combination of elements to post an earnings beat this quarter is Ericsson (ERIC - Analyst Report), with an Earnings ESP of +34.62% and a Zacks Rank #2.