Can Autodesk (ADSK) Beat Estimates This Earnings Season? - Analyst Blog

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Autodesk, Inc. ( ADSK ) is set to report the third-quarter 2014 results on Nov 20. In the last quarter, the company delivered a positive earnings surprise of 41.18%. The company has delivered positive earnings surprises in the last four quarters, with an average beat of 22.33%. Let's see how things are shaping up for this announcement.

Factors to Consider

We remain positive on Autodesk's long-term growth prospects as it is well-positioned to capitalize on the rapid adoption of computer-aided designing and manufacturing through its comprehensive product portfolio. We expect its broad product portfolio to generate new customers in both domestic as well as overseas markets.

Moreover, the increase in construction and manufacturing activities in the emerging markets present further growth opportunities. Additionally, a low channel inventory, increasing efficiencies through its channel partner framework, simplified upgrade pricing mechanism and electronic software delivery will help it to achieve long-term growth targets.

Autodesk's uneven top-line growth in the recent past has made it over-dependent on cost saving programs to boost earnings. Although restructuring programs are corrective measures to realign cost, their success often depends on execution. We believe that there is a certain limit up to which costs can be curtailed; the company needs to invest to boost organic growth.

However, foreign exchange fluctuations, increasing exposure to Europe and competition from the likes of Adobe Systems Inc. ( ADBE ) are the headwinds. Additionally, challenges in the form of customer concentration keep us on the sidelines.

Earnings Whispers?

Our proven model does not conclusively show that Autodesk is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #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 a loss of 11 cents. Hence, the difference is of 0.00%.

Zacks Rank: Autodesk's Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Best Buy Co., Inc. ( BBY ), with an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).

GameStop Corp. ( GME ), with an Earnings ESP of +1.61% and a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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