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Key Factors to Look for Ahead of CA Inc.'s (CA) Q3 Earnings

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CA, Inc. (CA - Free Report) is slated to release third-quarter fiscal 2018 results on Jan 30. The question lingering in investors’ minds is whether this IT management software company will be able to post a positive earnings surprise in the to-be-reported quarter. Notably, over the trailing four quarters, the company surpassed the Zacks Consensus Estimate thrice and posted in-line results in the other occasion. It has an average positive earnings surprise of 5.6%. So, let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 60 cents. We note that the Zacks Consensus Estimate remained nearly unchanged over the past 60 days. Additionally, analysts polled by Zacks project revenues of roughly $1.08 billion, up 7% from the year-ago quarter.

Factors at Play

We expect CA’s go-to-market sales strategy and acquisitions to drive the fiscal third-quarter top-line performance.

Let’s discuss the aforementioned factors one by one.

CA has adopted a “go to market” sales strategy. This brings together all the commercial functions, including sales, marketing, brand management, pricing and consumer insight. The integration of the marketing functions helps lower costs, consequently improving the bottom line.

Furthermore, acquisitions have been one of the key strategies of CA to enhance its IT management, software and services portfolio. The company, last year, completed the acquisition of Automic Holding GmbH and Veracode. These acquisitions have strengthened its position in the virtualization, automation, assurance in the cloud computing environment. These are some of the broad-based acquisition strategies adopted by the company in the recent past. We believe the diversity of its products and the increased efficiency offered by such buyouts will attract customers across sectors, lending stability to its business model.

Apart from pursuing growth through acquisitions, the company has been leveraging cloud computing in a bid to enable organizations to source the best components — internal, external, private cloud, public cloud, mobile and more — to construct the most competitive business applications without wasting much time and resource.

Further, the company is focused on providing advanced management and security software required by organizations to take complete advantage of this evolution.

On the other hand, heightening competition from Oracle (ORCL - Free Report) , International Business Machines and HP Inc., as well as exposure to Europe remain near-term headwinds.

What the Zacks Model Unveils?

Our proven model does not conclusively show that CA is likely to beat earnings 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 at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CA currently carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 60 cents. The combination of CA's Zacks Rank #3 and Earnings ESP of 0.00% makes surprise prediction difficult.

CA Inc. Price and EPS Surprise

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Facebook, Inc. has an Earnings ESP of +2.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Inc. (AAPL - Free Report) has an Earnings ESP of +0.77% and a Zacks Rank #3.

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