EMC Corporation (EMC) is set to report fourth quarter 2014 results on Jan 29, 2015. Last quarter, the company posted a negative earnings surprise of 2.7%. The company has posted an average negative earnings surprise of 1.1% over the past four quarters.
Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
EMC has been benefiting from its ongoing initiatives to broaden its presence in the cloud computing and Big Data space. Additionally, its strong footprint in the disk storage system market remains a positive. Also, the company’s robust financial position is enabling it to pursue strategic acquisitions like that of Spanning Cloud Apps Inc., Maginatics and Cloudscaling Group Inc., which are likely to drive results.
One of the major recent developments of the company is its nine-month standstill agreement with activist investor Elliot Management Corp. The company has been persistently insisted by Elliot Management on initiating a tax-free spin-off of its 80% stake in VMware (VMW). Elliot Management has further suggested that the upside to such a spinoff will exceed 40%.
However, the company has been witnessing increasing competition and pricing pressure for the last few quarters, which have been weighing on its margins. Further, unfavorable economic conditions have resulted in sluggish IT spending. This has increased pricing pressure from clients, which might adversely impact near-term financial performance.
Earnings Whispers?
Our proven model does not conclusively show that EMC is likely to 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 59 cents. Hence, the difference is of 0.00%.
Zacks Rank: EMC’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Ellie Mae, Inc. (ELLI) with Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy).
Apple Inc. (AAPL) with an Earnings ESP of +2.33% and a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment