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Will Alarm.Com (ALRM) Spring a Surprise in Q1 Earnings?

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Alarm.Com Holdings, Inc. (ALRM - Free Report) will report first-quarter 2017 results on May 9.Last quarter, the company delivered a positive earnings surprise of 50%.

The surprise history has been good in Alarm.Com’s case. The company surpassed estimates in each of the trailing four quarters with an average four-quarter positive surprise of 40.56%.

In the last one year, shares of Alarm.Com outperformed the Zacks categorized Security and Safety services industry. While the industry gained 15.9%, the stock returned 52.7%.

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

Factors to Consider

Alarm.Com offers cloud-based security and home automation products. By relying on cloud technology, the company significantly reduces operating costs and allows users to manage their home from anywhere. For example, users can remotely control almost anything in their home, including security systems, thermostats, light switches and even garage doors through a mobile application. The company also offers wellness and activity tracking software.

The company’s fourth-quarter earnings beat the Zacks Consensus Estimate by 6 cents. Also, revenues of $69.8 million were up 23% year over year. Moreover, SaaS and license revenues rose 21% year over year to $46.9 million.

The company has a differentiated product portfolio and broad dealer network. It is working toward building new service-provider relationships, breaking new ground in product innovation and achieving international reach. Naturally, this will help the company penetrate the home automation and security market, and gain share. This will also help in expanding its customer base, thereby driving results.

Alarm.Com is already poised to be a vantage player in the expanding home automation industry. For the first quarter, the company expects SaaS and license revenues in the range of $49.3–$49.5 million.

However, intensifying competition and an uncertain macro environment could impact results in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Alarm.Com will beat on earnings this quarter. That 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 are pegged at 13 cents. Hence, the Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alarm.Com’s Zacks Rank #2 increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Tyson Foods, Inc. (TSN - Free Report) , with an Earnings ESP of +3.77% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Banco de Chile (BCH - Free Report) , with an Earnings ESP of +0.74% and a Zacks Rank #2.

Global Partners LP (GLP - Free Report) , with an Earnings ESP of +233.3% and a Zacks Rank #1.

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