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What's in Store for Adobe Systems (ADBE) in Q3 Earnings?

Adobe Systems IncorporatedADBE is slated to report third-quarter 2015 results on Sep 17. In the last-reported quarter, Adobe recorded a positive earnings surprise of 9.68%. Let's see how things are shaping up for this announcement.

Factors to Consider

Adobe posted decent second quarter results with earnings exceeding the Zacks Consensus Estimate but the top line matching the same. The growth in earnings was backed by solid growth in its cloud business.

While Digital Media Solutions and The Digital Marketing segments were up sequentially, LiveCycle and Connect businesses and Print and Publishing segment were down.

We remain positive about Adobe's market position, its compelling product lines (including CS cloud initiative and digital media products), continued innovation and strong balance sheet. In addition, we believe that the consistent adoption of the Adobe marketing cloud could serve as a potential catalyst, going forward.

Also synergies from the acquisition of Fotolia and 3D modeling company, Mixamo will drive growth.

For the third quarter of 2015, Adobe expects revenues in the range of $1.175-$1.225 billion. The Zacks Consensus Estimate is pegged at $1.21 billion for revenues. GAAP earnings per share are expected in the range of 23-29 cents, while non-GAAP earnings are expected within 45-51 cents.

Earnings Whispers?

Our proven model does not conclusively show that Adobe will beat estimates 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: The Most Accurate estimate stands at 32 cents while the Zacks Consensus Estimate is pegged higher at 35 cents. This translates to a difference of -8.57%.

Zacks Rank: Adobe's Zacks Rank #3 (Hold) when combined with a negative 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 negative estimate revisions momentum.

Stocks to Consider

Here are some companies, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Walgreens Boots Alliance, Inc. WBA , with Earnings ESP of +6.17% and a Zacks Rank #2 (Buy)

Constellation Brands Inc. STZ , with Earnings ESP of +6.11% and a Zacks Rank #2

Citigroup Inc. C , with Earnings ESP of +6.43% and a Zacks Rank #2

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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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