We expect professional networking solution provider EMC Corporation (EMC - Analyst Report) to beat expectations when it reports third-quarter 2013 results on Oct 22, 2013.
Why a Likely Positive Surprise?
Our proven model shows that EMC is likely to beat the earnings estimate because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate is at +2.70%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating estimates. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of EMC Corp’sZacks Rank #2 and a +2.70% ESP makes us very confident in looking for an earnings beat on Oct 22.
What is Driving the Better than Expected Earnings?
EMC is well positioned to benefit from incremental data center hardware spending going forward. We believe that EMC’s vast product portfolio, which has products suitable for any kind of budget, will boost its market share going forward. Additionally, aggressive share repurchase will drive earnings going forward.
Moreover, EMC revenues are expected to benefit from the new mid-range VNX systems (pent-up demand), along with the refresh of its backup and recovery systems and the increase in demand of flash products in the second half of the year.
Moreover, the recently announced Project Nile is also likely to benefit the company in the long run, although companies such as International Business Machines Corp. (IBM - Analyst Report) offer competitive products to grab additional marketshare.
Other Stocks to Consider
EMC Corp is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 2 industry peers:
SanDisk Corporation(SNDK - Analyst Report), Earnings ESP of +2.84% and a Zacks Rank #1 (Strong Buy)
Asml Holding NV(ASML - Snapshot Report), Earnings ESP of +4.17% and a Zacks Rank #3 (Hold)