Teradata Corp. (TDC) is set to report third quarter 2014 results on Nov 6. Last quarter, it posted an 8.20% positive surprise. The company has posted an average positive earnings surprise of 8.90% over the past four quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
We believe that new customer wins and strengthening relationships with large vendors will be the primary revenue drivers. Teradata will continue to benefit from its international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market.
Moreover, the recent acquisitions of Think Big Analytics as well as the recent launch of services including the likes of Connection Analytics will bolster and diversify its offerings going forward. This, in turn, will drive top line growth.
However, increased investment in sales, a sluggish spending environment in the domestic market and increasing competition from EMC Corp. (EMC), NetApp and Nimble Storage are resulting in continued pricing pressure that will likely limit margin expansion in the rest of 2014.
Earnings Whispers?
Our proven model does not conclusively show that Teradata is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #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 62 cents. Hence, the difference is of 0.00%.
Zacks Rank #3 (Hold): Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% 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.
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