We expect The ADT Corporation ADT to beat expectations when it reports first-quarter fiscal 2016 results before the opening bell on Feb 2. Last quarter, the company’s earnings beat the Zacks Consensus Estimate by 3 cents.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that ADT is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +4.35%. This is because the Most Accurate estimate is pegged at 48 cents and the Zacks Consensus Estimate stands at 46 cents. This is a very meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: ADT has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement.
The combination of ADT’s Zacks Rank #3 and +4.35% ESP makes us confident of an earnings beat.
What is Driving the Better-than-Expected Earnings?
With a wide array of products to cater to a broad spectrum of customer needs, ADT has a strong footprint in the large and growing residential and small business security market. The company’s portfolio includes some of the most respected, trusted and well-known brands in the industry which should boost results in the first quarter.
Also, the security services provider is making efforts to create the ultimate security and home automation ecosystem through strategic partnerships. The company aims to offer customers the ability to design a custom smart home experience that integrates a diverse range of products with premium safety and security. In this regard, it partnered with Roost – an innovative home technology company – to provide professional monitoring and live support during emergencies within or outside the home.
The company is improving customer retention by stepping up investments in its Pulse platform and expects to strengthen its position through organic growth across the industry verticals and increased market penetration.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
American Capital, Ltd. ACAS, with an Earnings ESP of +12.50% and a Zacks Rank #1.
TCP Capital Corp. TCPC, with an Earnings ESP of +2.44% and a Zacks Rank #3.
Old National Bancorp. ONB, with an Earnings ESP of +17.86% and a Zacks Rank #2.
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