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Will Adobe Systems (ADBE) Beat Earnings Estimates in Q1?

Zacks

Adobe Systems Inc. ADBE is set to report fiscal first-quarter 2018 results on March 15. Last quarter, the software giant delivered a positive earnings surprise of 9.6%.

The surprise history has been strong in Adobe’s case. The company surpassed estimates in each of the trailing four quarters, with an average positive surprise of 9.03%.

On a 12-month basis, the company’s shares have returned 81.4% compared with the industry’s rally of 40.2%.


Strength in Digital Media Business

Revenues from Digital Media Solutions surged 29% year over year to $1.39 billion in the last quarter. Total Digital Media ARR (Annualized Recurring Revenues) totaled $5.23 billion. For the quarter under review, the Zacks Consensus Estimate for total Digital Media ARR is expected at $5.63 billion, driven by strong growth in the Creative Cloud and Document Cloud business lines.

The segment comprises Creative Cloud (CC) and Document Cloud (DC). In the last quarter, Creative ARR increased $3.15 billion and Creative revenues totaled $1.16 billion, up 30% from the year-ago quarter. Creative ARR is projected at $5 billion, driven by net-new subscriptions, adoption of enterprise services and focus on high-potential segments like education. Also, CC revenues for the upcoming quarter are expected to be $1.21 billion.

Also, DC ARR are expected to increase to $631 million in the upcoming quarter, driven by Adobe Sign, which is now Microsoft’s preferred e-signature solution across the company’s portfolio.

Strength in Digital Marketing Business

Within the Digital Marketing segment, Adobe Experience Cloud revenues were up 18% year over year to $550 million. Adobe Experience Cloud includes Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud. For the upcoming quarter, Adobe Marketing Cloud revenues are expected at $552 million, up from $550 million in the prior quarter. The new capabilities in Adobe Target will further enhance customer recommendations and targeting, optimize experiences, and automate the delivery of personalized offers.

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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Adobe has a Zacks Rank #2 and an Earnings ESP of -0.25%, not indicating a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

You may also consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

EVINE Live Inc. EVLV has an Earnings ESP of +13.79% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems Inc. FDS has an Earnings ESP of +0.18% and a Zacks Rank #3.

eBay Inc. EBAY has an Earnings ESP of +0.44% and a Zacks Rank #3.

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