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CA Inc. (CA) to Report Q2 Earnings: What Awaits the Stock?

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CA Inc. (CA - Free Report) is set to report second-quarter fiscal 2017 results on Oct 27. Last quarter, the company posted a positive earnings surprise of 5.36%. Notably, CA has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 5.09%.

Let us see how things are shaping up for this announcement.

Factors at Play

The company’s last quarterly results were ahead of expectations as its top- and bottom line both surpassed the respective Zacks Consensus Estimate. The year-over-year revenue comparison was also favorable.

We remain encouraged by CA’s acquisition strategy, which has enhanced its IT management, software and services portfolio. The company’s last year buyout of Rally Software is anticipated to drive its top- and bottom-line performances in the to-be-reported quarter.

Moreover, we believe that the breadth of its products and the increased efficiency offered by them will attract customers across sectors, lending stability to its business model.

The company has also 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 to lower costs, thereby improving the bottom line.

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

CA INC Price and EPS Surprise

CA INC Price and EPS Surprise | CA INC Quote

Earnings Whispers?

Our proven model does not conclusively show that CA will 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 57 cents. Hence, the difference is 0.00%.

Zacks Rank: CA’s Zacks Rank #3 when combined with a 0.00% ESP 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 a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Boyd Gaming Corporation (BYD - Free Report) , with an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corp. (NVDA - Free Report) , with an Earnings ESP of +8.93% and a Zacks Rank #3.

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