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EMC Corp (EMC - Analyst Report) is scheduled to release its fiscal second quarter 2012 results before the opening bell on July 24, 2012. In the run up to the earnings release we do not notice any significant estimates revision by the analysts covering the stock.

EMC has outperformed the Zacks Consensus Estimate in the preceding four quarters by 5.66%. We expect this trend to continue in the current quarter.

Previous Quarter Highlights

EMC reported first quarter 2012 earnings of 31 cents (including stock based compensation) that increased 29.2% year over year and were ahead of the Zacks Consensus Estimate by a couple of cents. The better-than-expected results were driven by robust top-line growth and strong margin expansion during the quarter.

Revenue increased 10.6% year over year to $5.09 billion in the reported quarter. This growth was primarily attributed to continued strong demand for EMC’s storage, data protection, virtualization and security products and services during the quarter. However, revenue fell short of the Zacks Consensus Estimate of $5.11 billion.

For further details please read: EMC Reports Mixed 1Q

Estimate Revision Trend

In the last 30 days, three out of the seven analysts covering the stock made a downward revision to the estimate, while no upward revision was witnessed. The Zacks Consensus Estimate for second quarter 2012 is pinned at 33 cents.

For the second quarter, the revenue estimate as per the Zacks Consensus is $5.29 billion, higher than $5.31 billion reported in the preliminary result. Analysts expect EMC’s results to be driven by the new storage contracts, as the company holds a dominating position in this segment.

Moreover, increasing adoption of cloud computing technology and expansions in the ‘Big Data’ segment will boost demand for EMC’s virtual infrastructure products, which in turn is expected to drive top-line growth going forward.

Recommendation

We believe that EMC’s vast product portfolio, which has products suitable for any kind of budget, will boost its market share going forward. Moreover, with strong balance sheet and incremental revenues, the company’s strategic acquisitions will have a positive impact in the long run.

Additionally, the increasing adoption of cloud computing technology will significantly drive the demand for EMC’s virtual infrastructure products, which in turn is expected to be accretive to top-line growth going forward. Further, EMC’s leading position in the emerging economies of the Asia-Pacific and Africa will boost its profitability, as higher revenues from these markets will offset a sluggish growth in the Americas and Western Europe going forward.

However, slowdown in the IT spending due to sluggish macro-economic environment  and increasing competition from companies such as International Business Machines Corp. (IBM - Analyst Report), Hewlett Packard Co. (HPQ - Analyst Report), NetApp Inc. (NTAP - Snapshot Report) and Dell Inc. remain the headwinds going forward.

We have a Neutral recommendation on EMC Corp over the long term (for the next 6 to 12 months). Currently, EMC Corp has a Zacks #3 Rank, which implies a Hold rating on short-term basis.

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