Adobe's (ADBE) Q4 Earnings To Top On Creative Cloud Strength

By Zacks Investment ResearchStock MarketsDec 10, 2017 09:00PM ET

www.investing.com/analysis/adobes-adbe-q4-earnings-to-top-on-creative-cloud-strength-200272146

Adobe's (ADBE) Q4 Earnings To Top On Creative Cloud Strength

By Zacks Investment Research | Dec 10, 2017 09:00PM ET

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Adobe Systems Inc. (NASDAQ:ADBE) is set to report fourth-quarter fiscal 2017 results on Dec 14. Last quarter, the software giant delivered a positive earnings surprise of 10%.

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 7.80%.

On a year-to-date basis, the company’s shares have returned 68.6% compared with the industry’s rally of 35.3%.

Strength in Digital Media Business

Revenues from Digital Media Solutions surged 28% year over year to $1.27 billion in the last reported quarter. Total Digital Media ARR (Annualized Recurring Revenues) totaled $4.87 billion. For the upcoming quarter, total Digital Media ARR is expected at $5.19 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 $272 million to $4.32 billion and Creative revenues totaled $1.06 billion, up 33% year over year. Creative ARR is projected at $4.60 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 $1.14 billion.

Also, DC ARR is expected to increase to $594 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 26% year over year to $508 million. Adobe Experience Cloud includes Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud. For the upcoming quarter, Adobe Marketing Cloud is expected at $547 million, up from $495 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) has along with a positive Earnings ESP has a good chance of beating estimates. Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Adobehas a Zacks Rank #1 and an Earnings ESP of +0.97%, indicating a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Adobe Systems Incorporated Price and EPS Surprise

Adobe Systems Incorporated Price and EPS Surprise | Adobe Systems Incorporated Quote

Stocks to Consider

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

Callidus Software Inc. (NASDAQ:CALD) has an Earnings ESP of +11.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PayPal Holdings, Inc (NASDAQ:PYPL) has an Earnings ESP of +0.28% and Zacks Rank #3.

Apple Inc. (NASDAQ:AAPL) has an Earnings ESP of +1.28% and a Zacks Rank #3.

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Adobe's (ADBE) Q4 Earnings To Top On Creative Cloud Strength

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