We expect digital software company Adobe Systems Inc. (ADBE) to beat expectations when it reports the fourth-quarter 2014 results on Dec 11.
Why a Likely Positive Surprise?
Our proven model shows that Adobe is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +5.9%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Adobe has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Adobe’s Zacks Rank #3 and +5.9% ESP makes us reasonably confident in looking for a positive earnings beat.
What is Driving the Better-than-Expected Earnings?
Adobe’s strong market position, compelling product lines (including CS cloud initiative and digital media products), continued innovation and strong balance sheet are expected to result in a positive earnings surprise in the upcoming quarter.
Adobe recently acquired Aviary which expanded its line-up of cloud-based products for designers and fabricators, resulting in higher Creative Cloud revenues. The company’s Creative Cloud subscription growth will continue to be driven by its attractive pricing, and frequent product, feature and service enhancements. Also, the solid adoption of Adobe marketing cloud could serve as a potential catalyst, going forward. Its acquisition of Neolane will further enhance Adobe Marketing Cloud by integrating online and offline marketing data and accelerating its entry into social media advertising. We believe the company’s growth strategies and solid execution will boost results, going ahead.
Other Stocks to Consider
Adobe is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:
Nike, Inc. (NKE), with an Earnings ESP of +1.45% and a Zacks Rank #2 (Buy).
FedEx Corporation (FDX), with an EarningsESP of +3.23% and a Zacks Rank #2.
Carnival Corporation (CCL), with an Earnings ESP of +10.53% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment