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Can Alarm.com (ALRM) Spring a Surprise in Q4 Earnings? (revised)

Zacks Equity Research

Alarm.com Holdings, Inc. ALRM has yet to announce the date of the company's Q4 2016 earnings call. Last quarter, the company posted a massive positive earnings surprise of 60.0%.

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

Talking about the price performance, over the past one year, shares of Alarm.Com outperformed the Zacks categorized Security and Safety services industry. While the industry gained 23.77%, the stock returned 72.61%.

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 third-quarter earnings beat the Zacks Consensus Estimate by 6 cents. Also, revenues of $67.8 million were up 26% year over year. Moreover, SaaS and license revenues rose 23% year over year to $44.6 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. In sum, this will help the company to 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 a vantage player in the expanding home automation industry. For the fourth quarter, the company expects SaaS and license revenues in the range of $45.8–$46.1 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 at 12 cents. Hence, the Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Zacks Rank: Alarm.Com’s Zacks Rank #3 increases the predictive power of ESP. But a 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 seeing negative estimate revisions.

Alarm.com Holdings, Inc. Price and EPS Surprise

Alarm.com Holdings, Inc. Price and EPS Surprise | Alarm.com Holdings, Inc. Quote

Stocks to Consider

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

WPX Energy, Inc. WPX, with an Earnings ESP of +11.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trinseo S.A. TSE, with an Earnings ESP of +5.30% and a Zacks Rank #2.

Jack in the Box Inc. JACK, with an Earnings ESP of +2.42% and a Zacks Rank #2.


(We are reissuing this article to correct a mistake. The original article, issued yesterday, February 20, 2017, should no longer be relied upon.)

 

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