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What's in the Cards for VASCO (VDSI) This Earnings Season?

Zacks Equity Research
Updated

VASCO Data Security International, Inc. VDSI, a leading security software firm, is scheduled to report fourth-quarter 2017 results after the closing bell on Feb 21. The company has a solid earnings surprise history, beating estimates twice in the trailing four quarters with a positive average earnings surprise of 183.3%.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

VASCO continues to develop innovative products that significantly reduce the risk of losses due to fraud and data theft. The trusted identity strategy of VASCO products provides enhanced data security with adaptive authentication.

In addition, the company is drawing on the in-house cloud expertise gained through the acquisition of eSignLive to develop the cloud-based elements of IDENTIKEY Risk Manager and trusted identity solutions. At the same time, VASCO is expanding eSignLive's growth opportunities through the deal with SEI Investments Co. in this quarter. SEI Investments announced that it will be integrating VASCO’s eSignLive e-signatures for SEI Trade. Such deals make us optimistic about the company’s top-line growth in the quarter.

The Zacks Consensus Estimate for VASCO’s fourth-quarter revenues is pegged at $50 million, slightly higher than reported revenues of $48 million in the prior-year quarter.

VASCO expects the long-term shift toward software and services to continue in the quarter. However, the company anticipates recording valuable contributions from its hardware business with a solid pipeline of business opportunities. VASCO is likely to continue aligning its resources with growth opportunities and enhanced ability to develop innovative solutions that identify and mitigate online and mobile threats. A change in top management combined with a focused approach is likely to support its healthy top-line growth.

The company continues to make investments to build its capabilities in sales, marketing and R&D. It remains focused on generating high operating margins driven by continuous investments and a shift in the product mix with higher gross-margin products. However, these investments might lead to higher expenses, curbing its profitability in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that VASCO is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This 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, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

VASCO Data Security International, Inc. Price and EPS Surprise
 

VASCO Data Security International, Inc. Price and EPS Surprise | VASCO Data Security International, Inc. Quote

Zacks Rank: VASCO has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

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

Stocks to Consider    

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

Sonic Automotive, Inc. SAH has an Earnings ESP of +2.42% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +0.48% and a Zacks Rank #3.

Workday, Inc. WDAY has an Earnings ESP of +2.37% and a Zacks Rank #3.

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VASCO Data Security International, Inc. (VDSI) : Free Stock Analysis Report
 
Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report
 
Workday, Inc. (WDAY) : Free Stock Analysis Report
 
Magna International Inc. (MGA) : Free Stock Analysis Report
 
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Zacks Investment Research