Broadridge Financial Solutions, Inc. (BR) is set to report second-quarter fiscal 2014 results on Feb 6. Last quarter, the company posted a positive earnings surprise of 95.0%. Let us see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Broadridge’s first-quarter 2014 results were impressive as both the top and bottom lines surpassed the Zacks Consensus Estimate.
Broadridge’s cost reduction initiatives and solid growth in net new businesses are the positives going forward. We remain optimistic on Broadridge’s strategic acquisitions, new product launches, share repurchase program and dividend hike. We also believe that its close association with Accenture (ACN) will create long-term opportunities for the company.
However, we remain concerned by the pricing pressures caused by significant competition from companies such as Barrett Business Services (BBSI) and DST Systems Inc.
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, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 28 cents. Hence, the difference is 0.00%.
Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings.
The combination of Broadridge’s Zacks Rank #1 and +0.00% ESP makes surprise prediction difficult.
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.
Other Stocks to Consider
Here is another company, which investors may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Affymetrix Inc. (AFFX), Earnings ESP of +14.29% and a Zacks Rank #1
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