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Can CA Inc. (CA) Keep the Earnings Streak Alive in Q4?

CA Inc. CA is set to report fourth-quarter fiscal 2016 results on May 11. Last quarter, the company posted a positive earnings surprise of 5.4%. It is worth noting that CA has outperformed the Zacks Consensus Estimate in the four preceding quarters with an average positive earnings surprise of 7.3%.

Let us see how things are shaping up for this announcement.

Factors to Consider

CA reported better-than-expected third-quarter results. The year-over-year revenue comparison was however unfavorable. CA’s major revenue generating segments were adversely affected during the quarter, primarily due to unfavorable foreign exchange impact.

Furthermore, we believe that the increased efficiency offered by the wide range of products will attract customers across sectors, lending stability to the business model. We are positive about CA’s increased cloud exposure. A modest cash position and share repurchase also appear encouraging.

CA has adopted a “go to market” sales strategy. This brings together all the commercial functions including sales, marketing, brand management, pricing and consumer insight, which in turn helps the company to improve its bottom line, by integrating the marketing functions in order to lower cost.

On the other hand, increasing competition from Oracle ORCL, International Business Machines and HP Inc. and exposure to Europe remain the near-term headwinds.

Earnings Whispers?

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

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 52 cents. Hence, the difference is 0.00%.

Zacks Rank: CA’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

TiVo Inc. TIVO with Earnings ESP of +25.00% and a Zacks Rank #1 (Strong Buy)

Synopsys Inc. SNPS with Earnings ESP of +6.38% and a Zacks Rank #1

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 >>


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
 
TIVO INC (TIVO): Free Stock Analysis Report
 
CA INC (CA): Get Free Report
 
ORACLE CORP (ORCL): Free Stock Analysis Report
 
SYNOPSYS INC (SNPS): Free Stock Analysis Report
 
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