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Stock to Beat Q1 Earnings: TASER International (TASR)

TASER International Inc. TASR will release first-quarter 2016 earnings results after the market closes on May 4. Last quarter, the company reported a positive earnings surprise of 125%. Let’s see how things are shaping up prior to this announcement.



Why a Likely Positive Surprise?

Our proven model shows that TASER International is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and TASER International has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +33.33%. This is because the Most Accurate estimate stands at 4 cents, while the Zacks Consensus Estimate is pegged slightly lower at 3 cents. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: TASER International currently carries a Zacks Rank #3.

The combination of TASER International’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Demand for TASER International’s products and services have seen a steep rise, particularly in the U.S., following increasing tensions between law enforcement officials and the public. The company’s entry into the wearable camera space will further boost its results.

In an attempt to improve transparency and restore public trust, police departments are now deploying their officers with body cameras in an attempt to ensure judicious use of firearms as well as fewer appeals against alleged police brutalities. TASER International’s AXON body-worn video cameras are, thus, in demand, with the company winning orders from domestic and international police departments. The hot-selling body cameras come with a cloud storage service – EVIDENCE.com.

In Jan 2016, the company announced that it has received orders for the Smart Weapons from police and law enforcement departments of various counties. Notable buyers include Bexar County Sheriff's Office, Arlington Police Department, Fort Lauderdale Police Department, Hollywood Police Department and Texas Department of Public Safety, along with a few international orders.

In February, the company entered into a partnership with Amped Software, a premier provider of forensic video enhancement tools, to offer a wide range of tools for law enforcement bodies. These tools will allow authorities to examine evidence through the Axon Forensic Suite. With this acquisition, the company became the reseller of three Amped Software products, renamed as Axon Convert, Axon Five and Axon Detect.

During its fourth-quarter earnings call, the company said that it expects the first-quarter bookings growth rate to be higher than the operating expense growth rate.

On the flip side, the company has witnessed volatility in its business due to intensifying competition in the space and cyclical sales of its products. The company’s gun sales often rise in the wake of mass shootings or police shootings of civilians, and then experience a slump as time passes.

Some Defense Releases

Northrop Grumman NOC reported first-quarter 2016 adjusted earnings of $2.77 per share, beating the Zacks Consensus Estimate of $2.47 by 12.1%. Earnings also jumped 29.4% from $2.14 earned in the year-ago quarter on higher sales volumes.

General Dynamics Corporation GD announced first-quarter 2016 earnings from continuing operations of $2.34 per share, comfortably surpassing the Zacks Consensus Estimate and higher than the year-ago figure of $2.14 by 9.3%.

Raytheon Company RTN reported first-quarter 2016 adjusted earnings from continuing operations of $1.43 per share, beating the Zacks Consensus Estimate of $1.36 by 5.1%. However, reported earnings plummeted 19.7% from the year-ago figure of $1.78.

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report
 
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