Security services provider The ADT Corporation (ADT) is scheduled to report its first-quarter fiscal 2015 results before the market opens on Jan 28. In the last reported quarter, ADT’s adjusted earnings comfortably beat the Zacks Consensus Estimate by 6 cents, making it the third consecutive double-digit quarterly earnings surprise for the company. Let’s see how things are shaping up for this announcement.
Key Factors in the First Quarter
ADT has initiated several key measures to accelerate growth, improve cost efficiencies, and optimize capital structure. In order to capture a greater share in the market, the company has invested heavily in its ADT Pulse platform and launched several new products.
ADT is also reducing customer attrition by initiating tighter credit screening policies, implementing resale efforts and customer loyalty programs. In order to reduce subscriber acquisition costs, ADT has implemented new technology and installation procedures and optimized lead management, sales conversion and marketing activities across all channels. The company’s collaboration with location-based services and family networking technology provider Life360 has added a new dimension to its expanding portfolio.
ADT believes monitored security and home/business automation services remain under-penetrated in North American households. In addition, rising concerns about crime and security issues (especially by an aging population), increasing customer interest in lifestyle and business productivity, and technology advancements are likely to support the higher penetration of interactive services and home/business automation.
As such, the company envisions significant growth potential and intends to capitalize on this opportunity by leveraging on its efficient operating model and lower technology costs over time. These would then enable the company to considerably reduce the cost of basic installation and services, thereby making it affordable for a wider market acceptance by a larger portion of households and businesses. We remain encouraged with such inherent growth prospects of the company.
Earnings Whispers
Our proven model conclusively shows that ADT is likely to beat earnings this quarter as it possesses the key ingredients for a success recipe.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +2.04%. This indicates a likely earnings beat.
Zacks Rank: ADT’s Zacks Rank #3 (Hold) combined with a positive ESP helps us to predict an earnings beat for the company. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Kemper Corporation (KMPR), earnings ESP of +2.78% and a Zacks Rank #3.
The Kroger Co. (KR), earnings ESP of +2.27% and a Zacks Rank #2.
Arch Capital Group Ltd. (ACGL) earnings ESP of +1.92% and Zacks Rank #1.
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