PCM (PCMI) Set to Report Q3 Earnings: Factors to Watch Out
PCM Inc. PCMI is set to report third-quarter 2018 results on Oct 24.
The company missed estimates in two of the last four quarters, the average negative earnings surprise being 10.92%. However, in the last reported quarter (second-quarter 2018), the company’s earnings outpaced the Zacks Consensus Estimate by a massive 27 cents.
Moreover, PCM’s top line lagged the consensus mark in three of the trailing four quarters. In second-quarter 2018, revenues came in at $546 million, lagging the Zacks Consensus Estimate of $570 million and declining 1.7% from the year-ago quarter.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $555.5 million, which reflects year-over-year growth of almost 1.8%. Moreover, the consensus mark for earnings has been steady at 50 cents over the last seven days.
Let’s see how things are shaping up prior to this announcement.
Key Factors to Watch Out
PCM is likely to benefit from its focus on higher-margin sales in areas like managed services, advanced technology, cloud and security solutions. Stringent cost control is also expected to boost profitability in the to-be-reported quarter.
However, focus on higher-margin sales is likely to hurt top-line growth. Moreover, a number of PCM customers are shifting from legacy licensing models toward subscription and cloud-based annuity software models.
PCM, Inc. Price and EPS Surprise
PCM, Inc. Price and EPS Surprise | PCM, Inc. Quote
Although the transition to Software-as-a-Service (SaaS) business model is driving gross margin, it is expected to hurt gross billed revenue growth in the near term. In the last reported quarter, software accounted for 29% of gross billed revenues but declined 10% year over year.
Moreover, sluggishness in the U.K. market, primarily due to Brexit-related headwinds, is likely to hurt top-line growth.
Further, PCM generates significant revenues from federal contracts. The higher mix of low-margin federal contracts is expected to negatively impact gross margin in the third quarter.
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 #2 and an Earnings ESP of 0.00%. 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:
DISH Network DISH has an Earnings ESP of +11.61% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Charter Communications CHTR has a Zacks Rank #2 and an Earnings ESP of +0.18%.
Shaw Communications SJR has an Earnings ESP of +1.85% and a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DISH Network Corporation (DISH) : Free Stock Analysis Report
Charter Communications, Inc. (CHTR) : Free Stock Analysis Report
Shaw Communications Inc. (SJR) : Free Stock Analysis Report
PCM, Inc. (PCMI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research