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Adobe Earnings Preview: Will It Miss? - Analyst Blog

Posted: 6/17/2013 3:31:00 PM
Referenced Stocks: ACN;ADBE;AKAM;YHOO

Adobe Systems Inc . ( ADBE ) is set to report second quarter 2013 results on June 18. Last quarter, it posted a 10.0% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Adobe's first-quarter earnings of 22 cents were in line with the Zacks Consensus Estimate. Revenues were down both sequentially as well as from the year-ago quarter but were above management's guidance due to increased adoption of Adobe's Creative Cloud. Margin expansion was limited due to the change in sales mix, which favored lower-margin products.

Adobe provided a modest outlook for the second quarter, with revenues forecast to increase 0.8% sequentially. Adobe expects non-GAAP earnings per share in the range of 29-35 cents, above the Zacks Consensus Estimate of 21 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 (Read: Zacks Earnings ESP: A Better Method ) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP:   The Most Accurate estimate stands at 19 cents while the Zacks Consensus Estimate is higher at 21 cents. That is a difference of -9.52%.

Zacks Rank #4 (Sell): 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

Other stocks that have both a positive earnings ESP and a favorable Zacks Rank are:

ACCENTURE PLC (ACN): Free Stock Analysis Report

ADOBE SYSTEMS (ADBE): Free Stock Analysis Report

AKAMAI TECH (AKAM): Free Stock Analysis Report

YAHOO! INC (YHOO): Free Stock Analysis Report

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