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Adobe (ADBE) Gears Up for Q4 Earnings: What's in the Cards?

Zacks Equity Research

Adobe Systems Inc. ADBE is set to report fiscal fourth-quarter 2019 results on Dec 12. In the last reported quarter, the software giant delivered a positive earnings surprise of 4.1%.

For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings has been stable at $2.26 per share over the past 30 days. This indicates growth of 23.5% from the year-ago reported figure.

Notably, the consensus mark for revenues is pegged at $2.97 billion, implying growth of 20.5% from the year-ago reported figure.

Let’s see how things have shaped up for this announcement.

Focus on Digital Media Business

Demand for Adobe’s Digital Media Solutions is expected to have increased in the fiscal fourth quarter. Impressive growth in Creative Cloud and Document Cloud business lines is expected to have resulted in strong Digital Media ARR (Annualized Recurring Revenues) in the to-be-reported quarter.

Markedly, the segment comprises Creative Cloud and Document Cloud (DC). Net new subscriptions, adoption of enterprise services and focus on high-potential segments like education are likely to have driven Creative ARR in the fiscal fourth quarter.

DC ARR is expected to have increased in the quarter to be reported, driven by solid enterprise adoption of Acrobat and Document Cloud services, as well as strong performance of Adobe Sign.

Adobe Systems Incorporated Price and EPS Surprise

 

Adobe Systems Incorporated Price and EPS Surprise

Adobe Systems Incorporated price-eps-surprise | Adobe Systems Incorporated Quote

Strength in Digital Marketing Business

Within the Digital Marketing segment, Adobe Experience Cloud revenues are anticipated to have improved in the quarter to be reported. Adobe Experience Cloud includes Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud.

Integration with Magento Commerce has led to strong performance of integrated content and commerce offerings of the company. In addition, multi-channel campaign management is another differentiated pillar of the Adobe Experience Cloud. The integration of Marketo with Adobe Campaign is expected to have expanded offerings across both B2B and B2C.

New capabilities in Adobe Target are expected to have further enhanced customer recommendation and targeting, and boosted revenues from this segment.

Notably, it has been able to create a niche for itself in the cloud software market. Strong demand for the company’s innovative solutions and products, strength across geographies, along with growing subscription for cloud application are likely to reflect on the to-be-reported quarter’s results.

Guidance

For fourth-quarter fiscal 2019, Adobe expects year-over-year revenue growth of 20% and 23% from Digital Media and Digital Experience segments, respectively. Management expects total revenues and non-GAAP earnings to be $2.97 billion and $2.25 per share, respectively.

What Our Model Says

Our proven model predicts an earnings beat for Adobe this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of +0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Adobe has a Zacks Rank #3.

Other Stocks to Consider

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

Seagate Technology PLC STX has an Earnings ESP of +1.04% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

First Horizon National Corporation FHN has an Earnings ESP of +2.13% and a Zacks Rank #3.

KeyCorp KEY has an Earnings ESP of +1.03% and a Zacks Rank #3.

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