EMC Corp
(
EMC
) is set to release its fiscal first quarter 2012 results before
the opening bell on April 19, 2012. In the run up to the earnings
results, no substantial movement in analysts' estimates for the
quarter was noticed.
Prior Quarter Recap
EMC reported fourth quarter 2011 earnings per share (
EPS
) of 42 cents, up 16.1% year over year and ahead of the Zacks
Consensus Estimate by a couple of cents. The better-than-expected
results were driven by robust growth in the top line during the
quarter, arising from the strong demand for EMC products
globally.
Revenues increased 14.0% year over year to $5.57 billion in the
fourth quarter, surpassing the Zacks Consensus Estimate of $5.49
billion. This growth was primarily attributed to continued strong
demand for EMC's storage, data protection, virtualization and
security products and services in the quarter.
For further details please read:
EMC Beats on Strong Revenues
Fiscal 2012 Expectations
EMC expects revenues of approximately $22.0 billion for fiscal
2012 (in line with the Zacks Consensus Estimate). Non-GAAP
operating income is expected to grow 17.0% for fiscal 2012.
Non-GAAP net income is expected to be approximately $3.7 billion
for the full year. EMC projects EPS of $1.70 for fiscal 2012,
excluding 30 cents related to stock-based compensation.
The current Zacks Consensus Estimate is pegged at $1.43 per
share for fiscal 2012 (includes stock based compensation), which is
slightly higher than management's outlook (including 30 cents in
stock-based compensation; the company's guidance translates to an
EPS of $1.40 for fiscal 2012). EMC also expects to repurchase
shares worth $700.0 million in fiscal 2012, which will boost EPS
growth going forward.
Estimate Revision Trend
In the last thirty days, only one out of the 7 analysts covering
the stock raised estimates for the current quarter, while none
moved in the opposite direction. The Zacks Consensus Estimate for
the quarter's EPS increased by a penny to 29 cents per share.
Likewise, for fiscal 2012, one upward revision was noticed from
the 8 analysts covering the stock. Despite the positive revision,
the Zacks Consensus Estimate for fiscal 2012 has remained static at
$1.43 per share over the last thirty days.
Analysts expect EMC to beat expectations aided by the new
storage contracts as the company holds a dominating position in
this segment. Moreover, increasing adoption of cloud computing
technology and expansions in the 'Big Data' segment will boost
demand for EMC's virtual infrastructure products, which in turn is
expected to drive top-line growth going forward.
Our Take
We note that EMC has performed consistently during the last 4
quarters with its average earnings surprise being 2.94%. For the
to-be-reported quarter, we expect the company to beat the Zacks
Consensus by the same magnitude.
We believe that EMC's vast product portfolio, which has products
suitable for any kind of budget, will boost its market share going
forward. Moreover, with strong balance sheet and incremental
revenues, the company's strategic acquisitions will have a positive
impact in the long run.
Besides, the increasing adoption of cloud computing technology
will significantly drive the demand for EMC's virtual
infrastructure products, which in turn is expected to be accretive
to top-line growth going forward. Further, EMC's leading position
in the emerging economies of the Asia-Pacific and Africa will boost
its profitability, as higher revenues from these markets will
offset a sluggish growth in the Americas and Western Europe going
forward.
However, increasing competition from companies such as
IBM Corp. (
IBM
)
,
Hewlett Packard Co. (
HPQ
)
, NetApp Inc.
(
NTAP
)
and
Dell Inc. (
DELL
)
remains a headwind going forward.
We have a Neutral recommendation on EMC Corp over the long term
(for the next 6 to 12 months). Currently, EMC Corp has a Zacks #1
Rank, which implies a 'Strong Buy' rating on short-term basis.
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