DST Systems Inc.DST is set to report third-quarter fiscal 2015 results on Oct 22. Last quarter, the company posted a negative earnings surprise of 4.79%. Let's see how things are shaping up for this announcement.
Factors This Past Quarter
DST reported mixed second-quarter results, wherein the bottom line missed the Zacks Consensus Estimate but the top line beat by a slight margin. Also, the quarter's revenues increased on a year-over-year basis. Lower number of client additions, unfavorable market conditions and lower-than-expected revenues from its operating segments adversely impacted the quarter's results.
However, we are still of the opinion that DST Systems' business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are the other encouraging factors.
On the other hand, decreasing organic revenue growth, tough competition from IBM Corp. IBM and Fiserv Inc., and a high debt burden remain concerns.
Our proven model does not conclusively show that DST will beat earnings this quarter. This 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.
Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.41 per share while the Zacks Consensus Estimate is pegged at $1.43. This equates to a difference of -1.40%.
Zacks Rank #3 (Hold): We caution against stocks with ZacksRank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Fiserv, Inc. FISV Earnings ESP of +3.09% and a Zacks Rank #2 (Buy)
- Apple Inc. AAPL Earnings ESP of +1.60% and a Zacks Rank #3 (Hold)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.