Electronic component distributor Arrow Electronics Inc. (ARW) is set to report fourth-quarter fiscal 2014 results on Feb 5. Last quarter, the company posted a positive earnings surprise of 6.9%. Moreover, it is worth noting that Arrow has outperformed the Zacks Consensus Estimate in all the four preceding quarters with an average positive surprise of 3.2%.
Let us see how things are shaping up for this announcement.
Factors to Consider
Arrow posted better-than-expected third-quarter of 2014 results. Year-over-year comparisons were also favorable and the company had a better book-to-bill ratio. Moreover, positive commentary about enhanced productivity and continued higher contributions from Europe are encouraging.
Arrow recently declared the acquisition of RDC, a wholly owned subsidiary of Computacenter UK Ltd. The acquisition appears to be quite profitable for Arrow as it will diversify and broaden the company’s product portfolio. Also, the acquisition will solidify the company’s foothold in the European market.
Furthermore, incremental sales from strategic acquisitions, such as Computerlinks, are also expected to boost Arrow’s top line, going forward. However, uncertain economic conditions, high debt burden and competition from Avnet and Ingram Micro are concerns, going forward.
Earnings Whispers?
Our proven model does not conclusively show that Arrow is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Symantec is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.82 per share.
Zacks Rank: Arrow carries a Zacks Rank #3 (Hold) which when combined with an ESP of 0.00% 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.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Cognizant Technology Solutions Corporation (CTSH) with an Earnings ESP of +1.70% and a Zacks Rank #2 (Buy).
Twitter, Inc. (TWTR) with an Earnings ESP of +4.76% and a Zacks Rank #3.
GrubHub Inc. (GRUB) with an Earnings ESP of +22.22% and a Zacks Rank #3.
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