Broadridge Financial Solutions Inc. BR is scheduled to report second-quarter fiscal 2016 results on Feb 4. Last quarter, the company posted a positive earnings surprise of 22.2%.
Let us see how things are shaping up for this announcement.
Factors to Consider
Broadridge reported mixed first-quarter results wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. However, year-over-year comparisons on both the counts were favorable driven by higher recurring revenues, contribution from Net New Business, internal growth and acquisition-related synergies.
We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture ACN will be beneficial over the long term. However, competition from DST Systems Inc. and pricing pressure remain the headwinds.
Earnings Whispers
Our proven model does not conclusively show that Broadridge will beat earnings 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: Earnings ESP for Broadridge is -3.03%. This is because the Most Accurate estimate stands at 32 cents per share, lower than the Zacks Consensus Estimate of 33 cents.
Zacks Rank: Broadridge’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive earnings surprise.
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 momentum.
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:
Baidu, Inc. BIDU, with an Earnings ESP of +11.25% and a Zacks Rank #2.
MSCI Inc. MSCI, with an Earnings ESP of +1.70% and a Zacks Rank #3.
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