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VeriSign (VRSN) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

VeriSign Inc. VRSN is set to report first-quarter 2017 results on Apr 27. In the last quarter, the company reported a positive earnings surprise of 6.33%.

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

Factors at Play

VeriSign holds a prime position in the highly regulated .com and .net domain industry. The renewal of the .com contract and price hikes for the .com and .net domain names are likely to drive VeriSign’s top line.

Furthermore, the company received approval from ICANN to increase domain fee from $7.46 to $8.20 effective Feb 1, 2017, which will be accretive to its revenues.

Also, we believe that gTLD prospects, international expansion through IDNs and investments in intellectual properties will boost results. Additionally, VeriSign has significant growth opportunities in the Distributed Denial of Service (DDoS) security market. VeriSign also has significant growth opportunities in the network security products space.

VeriSign, Inc. Price and EPS Surprise

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

However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to marketing remain primary headwinds. We note that VeriSign has underperformed the Zacks categorized Internet Software/Services industry on a year-to-date basis. The company’s shares have increased 16.3% compared with the industry’s gain of 21.7% during the period.

Earnings Whispers

Our proven model does not conclusively show that VeriSign is likely to beat earnings estimates this quarter. This 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. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for VeriSign is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at earnings of 86 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: VeriSign’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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.

Stocks That Warrant a Look

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

TIM Participacoes TSU with an Earnings ESP of +11.11% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avid Technology AVID with an Earnings ESP of +160% and a Zacks Rank #2.

DragonWave DRWI with an Earnings ESP of +8.82% and a Zacks Rank #2.

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VeriSign, Inc. (VRSN): Free Stock Analysis Report
 
DragonWave Inc (DRWI): Free Stock Analysis Report
 
Avid Technology, Inc. (AVID): Free Stock Analysis Report
 
TIM Participacoes S.A. (TSU): Free Stock Analysis Report
 
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