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Will EMC Corp. (EMC) Miss Earnings Estimates?

Zacks Equity Research

EMC Corporation (EMC) is set to report fourth-quarter 2013 results on Jan 29. Last quarter, it posted a 13.5% negative surprise. Additionally, the company has posted an average negative earnings surprise of 0.09% over the past four quarters.  

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

Growth Factors this Past Quarter

EMC is well positioned to benefit from incremental data center hardware spending going forward. The company’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 in the future.

EMC’s aggressive acquisition strategy has been largely responsible for the company’s positioning. Acquisitions have helped the company to enhance its presence in the emerging markets of cloud computing, big data, mobile and security applications.

However, increasing competition from the likes of IBM and Hewlett Packard, and a sluggish IT spending outlook for the next two years will continue to keep margins under pressure in the near term.

Earnings Whispers?

Our proven model does not conclusively show that EMC is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP:  That is because the Most Accurate estimate stands at $0.48 while the Zacks Consensus Estimate is $0.50. That makes a difference of -4.0%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Melco Crown Entertainment Limited (MPEL), earnings ESP of +2.50% and a Zacks Rank #1 (Strong Buy).

On Semiconductor Corp. (ONNN), earnings ESP of +14.29% and a Zacks Rank #2 (Buy).

Multimedia Games Holding Company, Inc. (MGAM), earnings ESP of +10.35% and Zacks Rank #2.

Read the Full Research Report on EMC
Read the Full Research Report on ONNN
Read the Full Research Report on MPEL
Read the Full Research Report on MGAM

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