Akamai Technologies, Inc. (AKAM) is set to report third-quarter 2014 results on Oct 29. In the last quarter, the company reported in-line results. However, the company has delivered positive earnings surprises in only one of the last four quarters, with an average of – 0.54%. Let’s see how things are shaping up for this announcement.
Growth Factors
We believe that strong demand for cloud infrastructure solutions, security, mobile products and online video will drive top-line growth. Akamai’s partnerships with the likes of AT&T (T), IBM (IBM), Orange, Swisscom, Korea Telecom and Türk Telekom are expected to boost top-line growth going forward.
Further, Akamai’s partnerships with the likes of Cisco (CSCO) and Qualcomm will help it to expand successfully in the cyber security market.
Moreover, Akamai’s superior content delivery platform has been selected by Apple due to its ability to provide high-quality service at a much lower rate than its peers. Additionally, the company’s dominance in the web application business is expected to be a significant growth catalyst, going ahead.
However, intense competition has kept pricing under tremendous pressure, which is a major headwind, going forward. In order to differentiate its products, Akamai is significantly investing in R&D and is also expanding its sales force, which will hurt margins in the rest of 2014.
Earnings Whispers?
Our proven model does not conclusively show that Akamai is likely to beat earnings this quarter. That 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 46 cents. Hence, the difference is of 0.00%.
Zacks Rank: Akamai 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 momentum.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Synaptics Inc. (SYNA) — with an Earnings ESP of +54.76% and a Zacks Rank #1 (Strong Buy).
Invensense Inc. (INVN) — Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).
Western Digital Corp. (WDC) — Earnings ESP of +0.98% and a Zacks Rank #3 (Hold).
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