AVG Technologies N.V. AVG is set to report second-quarter 2015 results on Aug 5. Last quarter, the company posted a positive earnings surprise of 13.89%.
Let's see how things are shaping up for this announcement.
Factors to Consider
AVG Technologies offers antivirus and Internet security products. Despite the persistent macro uncertainty, the company seems positive on the back of a healthy security market, strong product line-up, deal wins and investment plans which should boost results in the to-be-reported quarter.
The previous results show that AVG Technologies is gaining from the rising demand for cyber security. Notably, the company has been witnessing a higher number of large deal signings over the past few quarters which should positively impact second-quarter results.
With the advancement in technology, more organizations are adopting a bring-your-own-device (BYOD) policy. While BYOD has enhanced employee productivity with anytime, anywhere access, it has become all the more necessary for companies to enforce data security measures.
Furthermore, since the beginning of 2015, numerous data breaches at high-profile business houses and government agencies prompted the need to impose tighter security measures, which in turn boosted the demand for cyber security products. Per Gartner, worldwide spending on IT security in 2014 was about $70 billion and is likely to reach $76.9 billion in 2015.
Additionally, AVG Technologies closed a number of acquisitions so far this year, the biggest being Location Labs. The synergies from these acquisitions are expected to act as a tailwind for the company.
However, an uncertain economic environment, competitive pressure from Symantec Corporation SYMC and currency headwinds are likely to have a negative impact on the second-quarter results.
Earnings Whispers
Our proven model does not conclusively show that AVG Technologies will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: ESP for AVG Technologies is 0.00%. This is because the Most Accurate estimate stands at earnings per share of 40 cents, in line with the Zacks Consensus Estimate.
Zacks Rank: AVG Technologies’ Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Amtech Systems Inc. ASYS, with an Earnings ESP of +8.00% and a Zacks Rank #3.
SunEdison Inc. SUNE, with an Earnings ESP of +13.33% and a Zacks Rank #3.
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