We expect EMC Corporation (EMC) to beat expectations when it reports first quarter 2014 results on Apr 23. Last quarter, it posted a 4.0% positive surprise.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that EMC is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +7.41%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of EMC’s Zacks Rank #3 and +7.41% ESP makes us very confident in looking for a positive earnings beat.
What is Driving the Better Than Expected Earnings?
We believe that EMC is well positioned to benefit from incremental data center hardware spending, going forward. EMC’s vast product portfolio, which has products suitable for any kind of budget, will boost its market share, going ahead. Additionally, aggressive share repurchase will drive earnings, going forward.
However, increasing competition from the likes of IBM Corp. (IBM) and Hewlett-Packard (HPQ) and a sluggish IT spending outlook for the next couple of years will continue to keep margins under pressure in the near term.
Other Stocks to Consider
EMC is not the only firm looking up this earnings season. We also see likely earnings beat coming from this industry peer:
On Semiconductor Corp. (ONNN), Earnings ESP of +6.67% and Zacks #1 Rank (Strong Buy)