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What to Expect from EMC Corp. (EMC) this Earnings Season?

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EMC Corporation  is set to report second-quarter fiscal 2016 results on Jul 18. Last quarter, the company posted a negative earnings surprise of 4.76%. Over the past four quarters, the company has posted an average positive earnings surprise of 0.78%. Let’s see how things are shaping up for this announcement.

Factors to Consider

A day after EMC reports its second quarter results, it will put the anticipated merger with Dell to shareholders for approval. The deal should get shareholders support as it will give EMC a new lease of life. The company’s core data storage business has been struggling for a while due to growing competition from flash storage peers. The acquisition is expected to be closed between May and Oct 2016.

EMC is solidifying its position in the booming emerging markets like flash storage, cloud computing, Big Data, mobile and security applications. As customers increasingly move to flash and cloud-based technologies, management has stepped up efforts to develop new technologies (XtremIO, All Flash VMAX, VxRail and DSSD, ViPR software-defined storage, and Isilon scale-out storage). 

Further, we expect EMC to benefit from the strength in VMware (VMW), which remains one of the leading players in the virtualization and cloud computing market.

Meanwhile, EMC is also focused on streamlining its operations with initiatives like the divestiture of its non-core assets and cutting down on its workforce to reduce costs.

EMC CORP -MASS Price and EPS Surprise

EMC CORP -MASS Price and EPS Surprise | EMC CORP -MASS Quote

Earnings Whispers

Our proven model does not conclusively show that EMC is likely to beat earnings 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: EMC currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 33 cents.

Zacks Rank: EMC currently has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

QUALCOMM Incorporated (QCOM - Free Report) with Earnings ESP of +3.61% and a Zacks Rank #2.

Intel Corporation (INTC - Free Report) with Earnings ESP of +5.66% and a Zacks Rank #2

Amazon.com, Inc. (AMZN - Free Report) with Earnings ESP of +37.72% and a Zacks Rank #3

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