With fiscal second quarter earnings to be reported on June 19,
2012, we see no change in analyst estimates for
Adobe Systems Inc.
) to date.
Adobe's first quarter earnings of 42 cents missed the Zacks
Consensus Estimate of 46 cents due to lower revenue and its
significant exposure to the European region.
Adobe's total revenue was $1.045 billion, down 9.3%
sequentially, due to weakness across all segments, and particularly
in the CS product line. Products generated 77.4% of revenue that
was down 13.7% sequentially, while Subscription revenue comprised
14% of revenue and was up 18.5% sequentially. Services &
Support, which was down sequentially, brought in the balance.
Gross margin was 89.6%, up 10 bps from 89.5% in the comparable
year-ago quarter. The increase was on account of cost savings and a
For the second quarter, Adobe expects revenue of around $1.09
billion to $1.14 billion.
The GAAP EPS is expected to be 37 cents to 43 cents, including
stock-based compensation of 18-16 cents, restructuring and other
charges of 1 cent, intangibles amortization charges of 6 cents and
income tax adjustments of 5 cents, excluding all of which, non GAAP
EPS is expected to be 57-61 cents.
For the full year, Adobe expects GAAP earnings of $1.63 to $1.73
and non GAAP earnings of $2.38 to $2.48 based on a share count of
502 million to 504 million shares.
(Detailed earnings results can be viewed in the blog titled:
Adobe Fails to Match Up
Agreement of Analysts
None of the 11 estimates for the second quarter were revised in
the last 30 days. Even for fiscal 2012, there was no revision in
the last 30 days.
Most of the analysts believe that with the release of CS6 and
the Efficient Frontier acquisition, revenue and earnings per share
will likely come in at the high end of the management guidance
range ($1.09-$1.14 billion/$0.57-0.61). However, they believe that
negative foreign currency movement will act as a headwind.
The release of CS6 on May 7 is expected to have long-term
beneficial effects in terms of growth, cash flow and profitability.
The analysts believe that CS6 is off to a strong start, driven by
an enhanced feature set, pent-up demand, newer cloud features and
subscription pricing. The CS6 release includes the introduction of
Creative Cloud (CC), which is available to customers purchasing CS6
via Subscription. Additionally, Adobe's plans to introduce a set of
tablet-based apps should serve as an incremental revenue stream
according to analysts.
However, the analysts believe that the key to CS6 success will
be the ability of Subscription pricing to attract brand new
customers. They also do not expect strong operating margin
expansion due to the company's huge growth investments and
Magnitude of Estimate Revisions
In the last 30 days, there was no change in the Zacks Consensus
Estimates for the fourth quarter and fiscal year 2012.
Over the 90-day period, the Zacks Consensus Estimate remains
unchanged at 48 cents for the second quarter but increased by a
penny to $1.99 for fiscal 2012.
We believe Adobe will come out with decent second quarter
results owing to increasing revenue visibility, the CS6 release,
cost cutting efforts, improved execution and an expanding customer
base. We believe the company's dominance in the Creative category
and the integration of Creative products with digital marketing
apps will provide a competitive edge.
Additionally, Adobe's recent acquisition of Efficient Frontier
will enhance its Digital Marketing suite by adding optimization
capabilities for search and display advertising while accelerating
its entry into social advertising.
However, strong competition from
) remains a matter of concern.
Adobe shares currently have a Zacks #3 Rank, implying a
short-term Hold recommendation.
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