Akamai Technologies, Inc. AKAM is set to report first-quarter 2015 results on Apr 28. The company reported a positive earnings surprise of 5.66% in the last quarter. The company has delivered an average positive earnings surprise of 7.47% over the past four quarters.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Akamaiis likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.96%. This is a very meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Akamai currently carries a Zacks Rank #3 (Hold).
Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. Meanwhile, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
The combination of Akamai’s Zacks Rank #3 and +1.96% ESP makes us confident of an earnings beat this quarter.
What's Driving the Better-than-Expected Earnings?
In the last quarter, Akamai reported strong results with both the top line and the bottom line 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 in the first quarter and beyond. 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 AMZN, Netflix NFLX, Verizon and Comcast enter the market and join the likes of Limelight Network and Packeteer.
Stock to Consider
Here's a stock worth considering that, as per our model, has the right combination of elements to post an earnings beat this quarter:
Groupon, Inc. GRPN, with an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).
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