Adobe earnings preview: will it miss?
The software company is under close scrutiny, ahead of its second quarter results on Tuesday.
By Zacks Equity Research
Adobe Systems Inc. (ADBE) is set to report second quarter 2013 results on Tuesday. Last quarter, it posted a 10% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Adobe’s first-quarter earnings of 22 cents were in line with the Zacks Consensus Estimate. Revenues were down both sequentially as well as from the year-ago quarter, but were above management’s guidance due to increased adoption of Adobe’s Creative Cloud. Margin expansion was limited due to the change in sales mix, which favored lower-margin products.
Adobe provided a modest outlook for the second quarter, with revenues forecast to increase 0.8% sequentially. Adobe expects non-GAAP earnings per share in the range of 29–35 cents, above the Zacks Consensus Estimate of 21 cents.
Our proven model does not conclusively show that Adobe will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: The Most Accurate estimate stands at 19 cents while the Zacks Consensus Estimate is higher at 21 cents. That is a difference of -9.52%.
Zacks Rank #4 (Sell): 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
Other stocks that have both a positive earnings ESP and a favorable Zacks Rank are:
Akamai Tech (AKAM), Earnings ESP of +8.11% and Zacks Rank #1 (Strong Buy)
Accenture Plc. (ACN), Earnings ESP of +3.51% and Zacks Rank #2 (Buy)
Yahoo Inc. (YHOO), Earnings ESP of +3.85% and Zacks Rank #2 (Buy)
MSN Money on Twitter and Facebook
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
John Stumpf acknowledges that growth has been slow, but he says he's still optimistic.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.