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PCM (PCMI) to Post Q1 Earnings: Factors to Influence Results

Aniruddha Ganguly

PCM Inc. PCMI is set to report first-quarter 2019 results on Apr 25.

Notably, the company’s earnings have beaten the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 27.4%.

In the last reported quarter, the top line benefited from focus on security and collaboration solutions. PCM’s strategy of exiting non-core low-margin volume business also boosted its profitability.

The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $548 million, which indicates growth of almost 1% from the year-ago quarter’s reported figure. Moreover, the consensus mark for earnings has remained steady at 40 cents over the past 30 days.
 

PCM, Inc. Price and EPS Surprise

PCM, Inc. Price and EPS Surprise | PCM, Inc. Quote

 

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

Key Factors to Watch Out

PCM is likely to benefit from focus on higher-margin sales in areas like managed services, advanced technologies and cloud and security solutions. The company continues to exit non-core less profitable areas, which is a key catalyst.

However, focus on higher-margin sales is likely to hurt top-line growth in the first quarter, which is seasonally PCM’s slowest quarter in terms of sales and profitability.

Moreover, sluggishness in the U.K. market, primarily due to Brexit-related headwinds, is anticipated to negatively impact growth.

Further, PCM generates significant revenues from federal contracts. Hence, the U.S. government shutdown doesn’t bode well for the company’s to-be-reported quarter.

Additionally, higher mix of low-margin federal contracts is expected to negatively impact gross margin despite stringent cost control.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

PCM has a Zacks Rank #3 and an Earnings ESP of -3.80%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat in their upcoming releases:

Electronic Arts EA has an Earnings ESP of +15.98% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Charter Communications CHTR has a Zacks Rank #3 and an Earnings ESP of +5.33%.

Take-Two Interactive TTWO has an Earnings ESP of +7.94% and a Zacks Rank #3.

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