Can CA Inc. (CA) Surprise this Earnings Season? - Analyst Blog


CA Inc. ( CA ) is set to report fourth-quarter fiscal 2014 results on May 15. Last quarter, the company posted a positive earnings surprise of 17.65%. Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Although CA reported better-than-expected third-quarter fiscal 2014 results, the top line compared unfavorably with the year-ago quarter. CA's major revenue-generating segments were adversely affected during the reported quarter, which led to a decline in revenues. However, the company witnessed robust growth in bookings.

CA is witnessing rapid adoption of its Nimsoft Monitor Snap, a feature-rich free utility version of its popular CA Nimsoft Monitor solution. We believe that the breadth of its products and the increased efficiency offered by them will help attract customers across sectors, lending stability to the business model.

Additionally, CA's cloud expansion, recent strategic alliances and restructuring initiatives remain on track. A decent renewal rate, modest cash position and share repurchase activities also appear encouraging.

On the other hand, increasing competition from International Business Machines Corporation ( IBM ), Oracle  ( ORCL ) and Hewlett-Packard and exposure to Europe remain the near-term headwinds.

Earnings Whispers?

Our proven model does not conclusively show that CA will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 56 cents. Hence, the difference is 0.00%.

Zacks Rank: CA's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

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

Another Stock to Consider

Here is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Intuit Inc. ( INTU ), Earnings ESP of +1.18% and a Zacks Rank #2 (Buy)

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CA INC (CA): Free Stock Analysis Report

INTL BUS MACH (IBM): Free Stock Analysis Report

INTUIT INC (INTU): Free Stock Analysis Report

ORACLE CORP (ORCL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CA , IBM , INTU , ORCL

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