Akamai Technologies, Inc. (AKAM) is set to report fourth-quarter and full year 2014 results on Feb 10. The company reported a positive earnings surprise of 17.39% in the last reported quarter. Also, it has delivered positive earnings surprises in three out of the trailing four quarters with an average beat of 8.38%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
In the last quarter, Akamai reported strong results with both top and bottom lines improving significantly on a year-over-year basis driven by the strength across most of the solutions.
The company is likely to benefit from the rising demand for cloud infrastructure solutions, security, mobile products and online video. Additionally, Akamai’s partnerships with the likes of AT&T, IBM, Orange, Qualcomm, Swisscom, Korea Telecom, Türk Telekom and the recent alliance with Bangkok Bank are expected to boost top-line growth, going forward. Additionally, the company’s strong foothold in the web application business is expected to be a significant growth catalyst, going ahead.
However, Akamai is facing stiff competition and pricing pressure as non-traditional players like Amazon, Netflix, Verizon and Comcast enter the market and join the likes of Limelight Network and Packeteer. Although the company has a strong foothold in the market with rapidly changing technology, evolving industry standards and the frequent introduction of products and services, competition has become intense, impacting its growth rate.
Earnings Whispers?
Our proven model does not conclusively show that Akamai is likely to beat earnings 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.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.89%. This is because the Most Accurate Estimate is at 52 cents per share while the Zacks Consensus Estimate is pegged higher at 53 cents per share.
Zacks Rank: Akamai currently carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
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:
Century Aluminum Co. (CENX), with an Earnings ESP of +7.69% and a Zacks Rank #2 (Buy).
Boyd Gaming Corporation (BYD), with an Earnings ESP of +16.67% and a Zacks Rank #2.
Noranda Aluminum Holding Corp. (NOR), with an Earnings ESP of +30.00% and a Zacks Rank #2.
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