What's in the Cards for Akamai (AKAM) this Earnings Season?
Akamai Technologies, Inc.AKAM is set to release fourth-quarter 2016 earnings on Feb 7. In the last quarter, the company reported a positive earnings surprise of 6.25%. We note that the company delivered positive earnings surprises in three of the last four quarters, with an average positive earnings surprise of 2.51%.
Shares of Akamai have outperformed the broader Zacks Internet Services industry over the last one year. While the industry gained 11.0%, the stock gained a significant 55.4%.
Factors to Consider
Akamai is the leading global service provider for accelerating content and business processes online.
During the fourth quarter, Akamai acquired Cyberfend, a Santa Clara-based bot-detection startup to boost its existing services related to bot management and mitigation. With the introduction of Cyberfend's technology, Akamai is now able to help both online businesses and their customers to mitigate problems caused by data breach. This has strengthened Akamai's position in the cybersecurity space and bode well for its quarterly results. (Read: Akamai Acquires Cyberfend to Boost Bot Detection Capability ).
Moreover, Akamai acquired Sunnyvale-based Soha Systems, which provides "enterprise secure access-as-a-service" solution. The acquisition is targeted toward strengthening the company's Cloud Networking Solutions.
With the rapid adoption of cloud computing, security has become a major concern for enterprises and this deal will help Akamai to meet such demands. Hence, this development also remains a positive for the company in the soon-to-be reported quarter. (Read More: Akamai Adds Soha Systems to Cloud Networking Portfolio ).
However, foreign exchange impact on revenues, intensifying competition from the likes of Level 3 Communications and Limelight as well as an increasing trend of DIY initiatives by large Internet companies remain concerns for the company and may weigh on its performance in the soon-to-be reported quarter.
For fourth-quarter 2016, Akamai's management expects revenues in a range of $593 million to $613 million. Gross margin is expected to be 66%. Adjusted operating expenses are anticipated in a range of $222 million-$227 million, up $20 million sequentially.
Further, EBITDA margin is anticipated to be approximately 39-40%. Management forecasts EBITDA margin to decline in a high 30% range in 2017.
Non-GAAP earnings are projected in the range of $0.65-$0.70 per share.
Our proven model does not conclusively show that Akamai is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Akamai's Earnings ESP is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 53 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Akamai carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.
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.
Akamai Technologies, Inc. Price and EPS Surprise
Stocks to Consider
Here are some companies that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Applied Optoelectronics AAOI with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
Carbonite, Inc. CARB with an Earnings ESP of +150.00% and a Zacks Rank #1.
Pure Storage, Inc. PSTG with an Earnings ESP of +4.17% and a Zacks Rank #2.
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