) is scheduled to release its fiscal second quarter 2012 results
before the opening bell on July 24, 2012. In the run up to the
earnings release we do not notice any significant estimates
revision by the analysts covering the stock.
EMC has outperformed the Zacks Consensus Estimate in the
preceding four quarters by 5.66%. We expect this trend to continue
in the current quarter.
Previous Quarter Highlights
EMC reported first quarter 2012 earnings of 31 cents (including
stock based compensation) that increased 29.2% year over year and
were ahead of the Zacks Consensus Estimate by a couple of cents.
The better-than-expected results were driven by robust top-line
growth and strong margin expansion during the quarter.
Revenue increased 10.6% year over year to $5.09 billion in the
reported quarter. This growth was primarily attributed to continued
strong demand for EMC's storage, data protection, virtualization
and security products and services during the quarter. However,
revenue fell short of the Zacks Consensus Estimate of $5.11
For further details please read:
EMC Reports Mixed 1Q
Estimate Revision Trend
In the last 30 days, three out of the seven analysts covering
the stock made a downward revision to the estimate, while no upward
revision was witnessed. The Zacks Consensus Estimate for second
quarter 2012 is pinned at 33 cents.
For the second quarter, the revenue estimate as per the Zacks
Consensus is $5.29 billion, higher than $5.31 billion reported in
the preliminary result. Analysts expect EMC's results to be driven
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.
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.
Additionally, 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
However, slowdown in the IT spending due to sluggish
macro-economic environment and increasing competition from
companies such as
International Business Machines Corp.
Hewlett Packard Co.
) remain the headwinds 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 #3
Rank, which implies a Hold rating on short-term basis.
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