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EMC Corp to Report Q3 Earnings: What's in the Cards?

EMC CorporationEMC is set to report third-quarter 2015 results on Oct 21. Last quarter, the company posted a positive earnings surprise of 9.7%. However, over the past four quarters, the company has posted an average negative earnings surprise of 1.3%. Let's see how things are shaping up for this announcement.

Factors to Consider

On Oct 12, 2015, EMC announced that it was being taken over by Dell Inc. for $67 billion. EMC shareholders will receive $24.05 per share in cash along with tracking stock related to a portion of EMC's economic interest in VMware. Based on EMC's estimated outstanding shares at the close of transaction, stockholders will get 0.111 shares of new tracking stock for each EMC Corp share.

Simultaneously, EMC declared its preliminary third-quarter 2015 results. The company has projected revenues to lie between $6.05 and $6.08 billion, while non-GAAP earnings are expected to be 43 cents, excluding a stock-based compensation of 10 cents. The company has stated that unfavorable order timings impacted results in the quarter.

In addition, we believe significant competition in storage, cloud computing and Big Data markets, sluggish IT spending and pricing pressure, are also likely to be headwinds for the company in the near term.

However, the acquisition, once it closes is likely to be a positive for the company as it will give a new lease of life to EMC. The transaction is expected to close in 2016. EMC's board has approved the transaction. However, approval from regulatory authorities as well as EMC stockholders remains pending. The board has highly recommended the deal to shareholders. In addition, Dell's ability to raise the capital required for funding this buyout also remains a concern.

Earnings Whispers

Our proven model does not conclusively show that EMC is likely to 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.

Zacks ESP: EMC currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 33 cents.

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

Stock to Consider

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Pandora Media, Inc. P with an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).

Fiserv, Inc. FISV with an Earnings ESP of +3.09% and a Zacks Rank #2 (Buy).

Apple Inc. AAPL with an Earnings ESP of +1.60% and a Zacks Rank #3 (Hold).

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EMC CORP -MASS (EMC): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

PANDORA MEDIA (P): Free Stock Analysis Report

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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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