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What's in Store for VASCO (VDSI) This Earnings Season?

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Leading security software firm VASCO Data Security International Inc. is set to report second-quarter 2016 results after the market closes on Jul 28, 2016. In the last reported quarter, earnings beat the Zacks Consensus Estimate by 10 cents. VASCO also has a solid earnings surprise history, beating estimates in three of the last four quarters with a positive average earnings surprise of 73.91%.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

VASCO has been working on expanding its customer base, which in turn will have a positive impact on its revenues. VASCO is concentrating both on growing its business organically and making smart acquisitions. In the soon-to-be-reported quarter, VASCO introduced its DIGIPASS for Apps Face Recognition to provide organizations a frictionless authentication option to enhance security and improve the user experience.

This application has simple, secure and user-friendly features that utilize multiple facial data points to accurately authenticate end users, and next generation detection tools to overcome hacker spoofing techniques. The adoption of this innovative technology is likely to augment revenues and improve the bottom line.

During the quarter, VASCO’s eSignLive launched its Spring '16 Release for the cloud electronic signature software. The Spring '16 Release brings an intuitive sender interface that offers business users the simplest way to prepare and send documents for signature. This release also introduced the eSignLive for Apple Inc. (AAPL) iPad application. It offers the simplest way to prepare and send documents for signing on the iPad. In addition to an updated dashboard to monitor transactions, the new app offers offline signing functionality with no or limited connectivity.

The company continues to make investments to build its capabilities in sales, marketing and R&D. It remains focused on its goal to return to previous levels of high operating margins, driven by continuous investments and a mix shift to higher gross-margin products. However, in the to-be-reported quarter these investments may lead to higher expenses, in turn curbing its profitability.

VASCO DATA SEC Price and EPS Surprise

VASCO DATA SEC Price and EPS Surprise | VASCO DATA SEC Quote

Earnings Whispers

Our proven model does not conclusively show that VASCO is likely to beat on 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) to post an earnings beat. However, this is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 0.00%.

Zacks Rank: VASCO’s Zacks Rank #3 when combined with 0.00% ESP makes an earnings beat uncertain this quarter. We believe that Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Arctic Cat Inc. , earnings ESP of +12.50% and a Zacks Rank #3.

Cabot Oil & Gas Corp. (COG - Free Report) , earnings ESP of +12.50% and a Zacks Rank #2.

Casella Waste Systems Inc. (CWST - Free Report) , earnings ESP of +20.00% and a Zacks Rank #3.

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