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Analyst Blog

Teradata Corp. is set to report first-quarter 2014 results on May 8. Last quarter, the company posted a 6.3% positive surprise. The company has posted an average negative earnings surprise of 2.0% over the past four quarters. Year-to-date, Teradata’s share price has decreased 0.9% compared with an increase of 2.0% for the S&P 500.

Let’s see how things are shaping up:

Growth Factors This Past Quarter

We believe that customer wins and strengthening relationships with large vendors will be the primary revenue drivers going forward. We also believe that Teradata will continue to benefit from its international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market.

However, increased investment in sales, a sluggish spending environment in the domestic market and increasing competition from EMC Corp. , NetApp and Fusion-IO are resulting in continued pricing pressure that will likely limit margin expansion.

Tight IT spending is also expected to hurt top-line growth in the near term.

Earnings Whispers?

Our proven model does not conclusively show that Teradata is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Teradata stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 41 cents.

Zacks Rank: Teradata has a Zacks Rank #3 (Hold) which when combined with 0.00% ESP 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.

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