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We expect semiconductor company, Adobe Systems Inc. (ADBE - Free Report) , to beat expectations in its third-quarter fiscal2017 results on Sep 19.

The surprise history has been good in Adobe’s case. The company surpassed estimates in each of the trailing four quarters, with an average four-quarter positive surprise of 6.35%.

The company’s shares have charted a solid trajectory in recent times, increasing more than 51.7% year to date and outperforming the industry’s gain of 27.0%.

Why a Likely Positive Surprise?

Our proven model shows that Adobe is likely to beat on earnings this time around because it has the right combination of the two key ingredients.

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate stand at $1.01 and $1.00, respectively, resulting in an Earnings ESP of +0.54%.This is an indicator of a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Adobecarries a Zacks Rank #3 (Hold).

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of beating earnings estimates. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negavtive estimate revisions. 

The combination of Adobe’s favorable Zacks Rank and positive Earnings ESP makes us confident about an earnings beat.

What is Driving the Better-Than-Expected Earnings?

Adobe is one of the largest software companies in the world with a massive customer base that provides it with a distinct competitive edge. The company is being driven by continuous innovation in its Creative Cloud (CC), Document Cloud and Marketing Cloud businesses.

The Creative business under the Digital Media Solutions segment is witnessing acceleration in Creative Cloud subscriptions. Also, CC mobile apps are continuously driving customer traffic and strengthening customer adoption. Moreover, Adobe’s increasing market share in the artificial intelligence (AI) space will also expand its top-line growth. The company is extending its digital marketing offerings to the auto market to drive the next phase of revenue growth.

Increased subscription as well as ETLA and digital publishing suite adoption should also drive Creative Cloud’s annualized recurring revenues.

Notably, this software company’s solid market position, compelling product lines, strong revenue growth and balance sheet strength are big positives. Additionally, continued adoption of the Adobe marketing cloud could serve as a catalyst in the to-be-reported quarter.

We expect the company to report strong results in the upcoming quarter.

Stocks to Consider

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

Cathay General Bancorp (CATY - Free Report) , with an Earnings ESP of +2.52% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank  stocks here.

International Business Machines Corporation (IBM - Free Report) , with an Earnings ESP of +0.46% and Zacks Rank #3.

Del Taco Restaurants, Inc. (TACO - Free Report) , with an Earnings ESP of +1.96% and Zacks Rank #3.

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