Splunk Inc. (
to beat expectations when it reports first-quarter 2014 results
on May 30.
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Why a Likely Positive Surprise?
Our proven model shows that Splunk is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP
: Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
Estimate and the Zacks Consensus Estimate, is at +16.67%. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for shares.
Zacks Rank #3 (Hold)
: Note that stocks with Zacks Ranks of #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of Splunk's Zacks Rank # 3 (Hold) and +16.67% ESP
makes us very confident in looking for a positive earnings beat
on May 30.
What is Driving the Better-Than-Expected
Innovative product pipeline, customer wins, higher renewal rates
and expansion into new markets are expected to drive a positive
earnings surprise in the first quarter.
Although Splunk lagged the Zacks Consensus Estimate by an average
of 91.7% over the last four quarters, estimates have moved a
couple of cents upward over the last 30 days. The positive trend
is due to the expectation that Splunk's top line will continue to
benefit with strong core market demand and new product
Other Stocks to Consider
We also see likely earnings beat coming from three industry
Pegasystems Inc (
, Earnings ESP of +14.29% and Zacks Rank #1 (Strong Buy)
Advent Software (
, Earnings ESP of +7.69% and Zacks Rank #2 (Buy)
, Earnings ESP +3.85% and Zacks Rank #2 (Buy).