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Will CA Inc. (CA) Earnings Fall Short of Estimates in Q4? - Analyst Blog

Zacks Equity Research
Updated

CA Inc. CA is set to report fourth-quarter fiscal 2015 results on May 7. Last quarter, it posted a positive surprise of 14.3%. Let's see how things are shaping up for this announcement.

Factors to Consider

CA reported mixed third-quarter results wherein the bottom line beat the Zacks Consensus Estimate but the top line missed. The year-over-year comparisons were not favorable either. CA’s major revenue generating segments were adversely affected during the reported quarter primarily due to unfavorable foreign exchange impact.

Nonetheless, we believe that the breadth of its products and the increased efficiency offered by them 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.

On the other hand, increasing competition from Oracle ORCL, IBM IBM and Hewlett-Packard HPQ 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. That 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at -4.44%. This is because the Most Accurate estimate of 43 cents is lower than the Zacks Consensus Estimate of 48 cents.

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

Other Stocks to Consider

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

Tsakos Energy Navigation Ltd. TNP with Earnings ESP of +11.77% and a Zacks Rank #2 (Buy)AOL Inc. AOL with an Earnings ESP of +8.70% and a Zacks Rank #3
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