Will Adobe (ADBE) Disappoint This Earnings Season? - Analyst Blog

By
A A A

Adobe Systems Inc. ( ADBE ) is set to report first-quarter 2014 results on Mar 18. Last quarter, it posted 5.3% negative surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Adobe's fourth-quarter earnings of 18 cents exceeded the Zacks Consensus Estimate by a penny due to solid cost management and higher revenues. Revenues were up sequentially and at the higher end of management's guidance range due to the accelerated adoption of creative cloud subscription pricing model.

Margin expansion was limited due to the change in sales mix, which favored lower-margin products.

For the second quarter, management expects revenues in the range of $950 million to $1.0 billion, down 6.7% sequentially at the mid-point. Adobe expects non-GAAP earnings per share in the range of 22-28 cents, well above the Zacks Consensus Estimate of 12 cents.

Earnings Whispers?

Our proven model does not conclusively show that Adobe 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 12 cents. Hence, the difference is 0.00%.

Zacks Rank: Adobe'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.

Other Stocks to Consider

You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Emerge Energy Services LP ( EMES ), with Earnings ESP of +8.96% and a Zacks Rank #1.

Ring Energy, Inc. ( REI ), with Earnings ESP of +50.00% and a Zacks Rank #2 (Buy).

Chesapeake Granite Wash Trust ( CHKR ), with Earnings ESP of +6.45% and a Zacks Rank #2.



ADOBE SYSTEMS (ADBE): Free Stock Analysis Report

CHESAPEAKE GRNT (CHKR): Free Stock Analysis Report

EMERGE ENRG SVC (EMES): Free Stock Analysis Report

RING ENERGY INC (REI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



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: ADBE , CHKR , EMES , REI

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

How to Fire Your Adviser
How to Fire Your Adviser            

Stocks

Referenced

Most Active by Volume

75,750,465
  • $16.77 ▲ 0.36%
59,791,764
  • $101.58 ▲ 0.71%
38,720,622
  • $42.59 ▼ 0.28%
37,416,417
  • $46.52 ▼ 0.51%
35,101,793
  • $16.28 ▲ 0.74%
34,987,975
  • $99.53 ▲ 0.15%
33,760,830
  • $3.63 ▲ 0.69%
32,148,671
  • $17.61 ▲ 0.57%
As of 9/17/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com