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Bear of the Day: Nuance Communications (NUAN)

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Nuance Communications has been Bear of the Day many times in the past few years. I know because I wrote several of those reports from 2013 through 2015 when it seemed like shares could never get very far from $15.

And despite its intriguing Dragon voice technology and notable ownership over the years by smart hedge fund titans like Carl Icahn, the single dynamic that continues to make NUAN a Zacks #5 Rank keeps cropping up, or rather, down.

I'm talking about earnings estimates of course. While 2016 looked promising as estimates headed back up over $1 for full-year EPS, May of 2017 has brought an end to that party for the $5.5 billion NUAN.

In the past week, the Zacks EPS consensus for the fiscal year ending in September has dropped from $1.06 to $0.78.

And analyst moves for fiscal year 2018 have seen the consensus profit projection also fall about 27% from $1.13 to $0.82.

Drifting Sales, Sailing Whales

The sales picture tells part of the story as revenues appear to flat-line near $2 billion annually.

This year's haul is expected to be $2.04 billion, only a 4% increase over last year. And next year's $2.11 billion top line will only represent 3.66% growth.

Plus, these sales estimates may fall further too if analysts have not updated us yet fully on that component.

And one investor who is not waiting around to find out anymore is Carl Icahn. In SEC quarterly filings this week it was revealed that he has now given up and liquidated his stake. In short, this investment "whale" has turned tail and sailed away.

With $2 billion in annual sales, it's hard to say that this is a company you should give up on. But with a forward P/E ratio near 25X and the "E" once again falling faster than the "P," it's probably best to stay on the sidelines at this time with NUAN.

The Zacks Rank will let you know when the Dragon is safe again.

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