Adobe Systems ( ADBE ) reported quarterly earnings of $4.48 per share, beating the Zacks’ consensus estimate of $4.38 per share. That compares with earnings of $3.80 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report presents a profit surprise of 2.28%. A quarter ago, the software maker was expected to post earnings of $4.13 per share, but it actually posted earnings of $4.27, which surprised 3.39%.
Over the past four quarters, the company has beaten consensus EPS estimates four times.
Adobe, which belongs to the Zacks Computer – Software industry, reported revenue of $5.18 billion for the quarter ending February 2024, beating the Zacks’ consensus estimate of 0.94%. That compares to last year’s revenue of $4.66 billion. The company has beaten consensus revenue estimates four times in the past four quarters.
The sustainability of the current share price movement based on recently released numbers and future earnings expectations will depend mostly on management’s commentary on the earnings call.
Shares of Adobe have lost about 3.9% since the start of the year versus the S&P 500’s gain of 8.3%.
What’s next for Adobe?
While Adobe has underperformed the market this year, the question on investors’ minds is: What’s next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this question is a company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarters, but also how those expectations have changed recently.
Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track such revisions themselves or rely on a proven rating tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revision trend for Adobe: Favorable. While the size and direction of the estimate revisions could change after the company’s just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the stock is expected to outperform the market in the near term. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how the estimates for the upcoming quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $4.36 on $5.3 billion in revenue for the upcoming quarter and $17.89 on $21.42 billion in revenue for the current fiscal year.
Investors should keep in mind the fact that the outlook for the industry can also have a significant impact on a stock’s performance. In terms of Zacks Industry Rank, Computer – Software is currently in the top 19% of the 250 plus Zacks industries. Our research shows that the top 50% of Zacks-Rank industries outperform the bottom 50% by a factor of more than 2-to-1.
Another stock from the same industry, Simulations Plus ( SLP ), has yet to report results for the quarter ended February 2024.
This maker of software used in pharmaceutical research is expected to post quarterly earnings of $0.18 per share in its upcoming report, representing a year-over-year change of -10%. The consensus EPS estimate for the quarter was unchanged over the past 30 days.
Simulations Plus revenue is expected to be $17.07 million, an increase of 8.4% over the same period last year.
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