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Adobe Systems (ADBE): A Surprise in Q4 Earnings Release?
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Adobe Systems Inc. (ADBE - Free Report) is slated to report fourth-quarter fiscal 2016 results on Dec 15. Last quarter, the company recorded a positive earnings surprise of 3.45%.
Shares of Adobehave been have been steadily treading higher on a year-to-date basis. The stock has returned 11.04% compared with the Zacks Computer-Software industry’s gain of 10.97%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Adobe is being driven by continuous innovation in the Creative Cloud and Marketing Cloud businesses.
The Creative business under the Digital Media Solutions segment is seeing acceleration in Creative Cloud subscriptions. Also, the conversion of enterprise customers to Enterprise Term License Agreements (ETLAs) is resulting in higher adoption of its enterprise Creative Cloud offering.
Increased subscription as well as ETLA and digital publishing suite adoption should drive Creative Cloud’s annualized recurring revenues.
We are also positive on Adobe’s market position, compelling product lines and balance sheet strength. In addition, we believe that continued adoption of the Adobe marketing cloud could serve as a catalyst in the to-be-reported quarter.
Adobe posted strong fiscal third-quarter results with both earnings and revenues beating the Zacks Consensus Estimate. Revenues were up 4.7% sequentially and 20.4% year over year on the back of strong adoption of Creative Cloud.
However, lower end-market demand, increasing competition from Microsoft and Apple, and significant exposure to the economically troubled European region could be matters of concern.
For fiscal fourth quarter, Adobe expects revenues in the range of $1.55–$1.6 billion. Based on a share count of 503–505 million, GAAP earnings are expected within 60–66 cents per share. Non-GAAP earnings are projected in the range of 83–89 cents.
Earnings Whispers
Our proven model does not conclusively show that Adobe will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 72 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Adobe has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Marvell Technology Group Ltd. (MRVL - Free Report) , with an Earnings ESP of +8.33% and Zacks Rank #1.
Barracuda Networks, Inc. , with an Earnings ESP of +20.00% and a Zacks Rank #2.
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Adobe Systems (ADBE): A Surprise in Q4 Earnings Release?
Adobe Systems Inc. (ADBE - Free Report) is slated to report fourth-quarter fiscal 2016 results on Dec 15. Last quarter, the company recorded a positive earnings surprise of 3.45%.
Shares of Adobehave been have been steadily treading higher on a year-to-date basis. The stock has returned 11.04% compared with the Zacks Computer-Software industry’s gain of 10.97%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Adobe is being driven by continuous innovation in the Creative Cloud and Marketing Cloud businesses.
The Creative business under the Digital Media Solutions segment is seeing acceleration in Creative Cloud subscriptions. Also, the conversion of enterprise customers to Enterprise Term License Agreements (ETLAs) is resulting in higher adoption of its enterprise Creative Cloud offering.
Increased subscription as well as ETLA and digital publishing suite adoption should drive Creative Cloud’s annualized recurring revenues.
We are also positive on Adobe’s market position, compelling product lines and balance sheet strength. In addition, we believe that continued adoption of the Adobe marketing cloud could serve as a catalyst in the to-be-reported quarter.
Adobe posted strong fiscal third-quarter results with both earnings and revenues beating the Zacks Consensus Estimate. Revenues were up 4.7% sequentially and 20.4% year over year on the back of strong adoption of Creative Cloud.
However, lower end-market demand, increasing competition from Microsoft and Apple, and significant exposure to the economically troubled European region could be matters of concern.
For fiscal fourth quarter, Adobe expects revenues in the range of $1.55–$1.6 billion. Based on a share count of 503–505 million, GAAP earnings are expected within 60–66 cents per share. Non-GAAP earnings are projected in the range of 83–89 cents.
Earnings Whispers
Our proven model does not conclusively show that Adobe will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 72 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Adobe has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
ADOBE SYSTEMS Price and EPS Surprise
ADOBE SYSTEMS Price and EPS Surprise | ADOBE SYSTEMS Quote
Stocks to Consider
You could consider the following stocks that have a positive Earnings ESP and a favorable Zacks Rank for their upcoming releases.
Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +4.76% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Marvell Technology Group Ltd. (MRVL - Free Report) , with an Earnings ESP of +8.33% and Zacks Rank #1.
Barracuda Networks, Inc. , with an Earnings ESP of +20.00% and a Zacks Rank #2.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>