We expect cybersecurity company, Symantec Corporation (SYMC - Free Report) , to beat expectations when it reports first-quarter fiscal 2018 results on Aug 2.
Last quarter, the company posted a negative earnings surprise of 75%. Notably, Symantec has a mixed record of earnings surprises in recent quarters. The stock has outperformed the Zacks Consensus Estimate twice, missed the same in one occasion and came in line with the other, over the trailing four quarters. It has an average negative earnings surprise of 13.8%. Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Symantec is likely to beat on earnings because it has the right combination of the two key components.
Zacks ESP: Symantec currently has an Earnings ESP of +16.67%. This is because the Most Accurate estimate is pegged at 14 cents, while the Zacks Consensus Estimate comes in lower at 12 cents. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Symantec currently carries a Zacks Rank #2 (Buy). It should be noted that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement.
The combination of Symantec’s Zacks Rank #2 and a positive ESP make us reasonably confident of a positive earnings beat.
What's Driving the Better-than-Expected Earnings?
Symantec has been clocking solid returns, and in the year-to-date period it has gained approximately 29.9%, outperforming 22.3% growth recorded by the industry, which it belongs to.
We believe that the company will continue to benefit from strong demand for cybersecurity solutions. It should be noted that the financial well-being, brand image, and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.
With rapid technological advancement, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity, with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
Moreover, various independent research firms had forecast strong demand in 2017. Gartner had predicted that the worldwide Information Security spending would reach $90 billion in 2017, marking 7.6% growth from the 2016 level of approximately $83.6 billion.
We believe that Symantec must have capitalized on this opportunity. We anticipate that this might be well reflected in the company’s results in the quarter to be reported.
Furthermore, the company’s mobile and cloud security products are gradually gaining market acceptance. The storage and server management business provides recovery solutions and heterogeneous storage-end server platforms. We believe that these innovative products and solutions will have helped Symantec win customers in the last quarter, thus increasing its business volume.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:
Salesforce.com Inc. (CRM - Free Report) , expected to release earnings on Aug 30, currently has an Earnings ESP of +11.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
CA Inc. (CA - Free Report) , scheduled to release earnings on Aug 2, currently has an Earnings ESP of +4.00% and a Zacks Rank #3.
Citrix Systems, Inc. (CTXS - Free Report) , slated to release earnings on Aug 2, currently has an Earnings ESP of +1.18% and a Zacks Rank #3.
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