Can EMC Corp. (EMC) Surprise This Earnings Season? - Analyst Blog

By Zacks Equity Research,

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EMC Corporation ( EMC ) is set to report second quarter 2014 results on Jul 23, 2014. Last quarter, it posted in-line earnings. The company has posted an average negative earnings surprise of 2.19% over the past four quarters.  

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

Growth Factors This Past Quarter

We believe that a strategic focus shift towards cloud computing and Big Data is a key growth catalyst. Also, the fact that the company persistently ranks at the top of customer surveys for overall satisfaction is a positive for EMC's operations. Moreover, aggressive share repurchase will drive earnings, going forward.

Over the last few quarters, EMC has witnessed robust growth in emerging storage product sales. Per IDC, the all-flash storage array market is likely to be worth $1.2 billion by 2015. We believe that emerging storage will continue to register strong growth in the coming quarters, with sizable contributions from flash storage products such as XtremIO arrays. The recent acquisition of DDSD will further ramp up its flash portfolio.

However, increasing competition from the likes of IBM Corp. and Hewlett-Packard and a sluggish IT spending outlook for the next couple of years will continue to keep margins under pressure in the near term.

Earnings Whispers?

Our proven model does not conclusively show that EMC is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #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 35 cents. Hence, the difference is of 0.00%.

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

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

Other Stocks to Consider

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

  • Silicon Motion Technology Corp. ( SIMO ), Earnings ESP of +33.33% and Zacks Rank #1 (Strong Buy)
  • F5 Networks Inc. ( FFIV ), Earnings ESP of +3.81%and Zacks Rank #2 (Buy)
  • Western Digital Corporation ( WDC ), Earnings ESP of +4.02% and Zacks Rank #2 (Buy)

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WESTERN DIGITAL (WDC): Free Stock Analysis Report

F5 NETWORKS INC (FFIV): Free Stock Analysis Report

SILICON MOTION (SIMO): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: EMC , WDC , FFIV , SIMO

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