Adobe Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Adobe (NASDAQ: ADBE  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Software giant Adobe is best known for its PDF-reader and photo-editing software, but the company has a much broader reach across the creative-design, publishing, and online analytics segments. Let's take an early look at what's been happening with Adobe over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Adobe

Analyst EPS Estimate

$0.31

Change From Year-Ago EPS

(46%)

Revenue Estimate

$986 million

Change From Year-Ago Revenue

(5.7%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Adobe paint a prettier picture this quarter?
Analysts have had some concerns about Adobe's prospects in recent months, cutting their earnings estimates for the just-ended quarter by $0.02 per share and slashing nearly a dime from full fiscal-year 2013 consensus earnings. But the stock hasn't responded badly to those fears, rising 10% since mid-December.

Among consumers, Adobe's Acrobat PDF-reader and Photoshop image software represent the company's most visible products. Yet among investors, Adobe is arguably best known for the battle it had with Apple (NASDAQ: AAPL  ) over its Flash software, as Apple infamously said it would never include Flash in any of its mobile devices. In response, Adobe shifted to the more widely accepted HTML5, showing the influence that the iDevice maker had in the mobile space.

Adobe has had difficulty bouncing back both from that battle and the broader economic recession. Although Adobe has grown its revenue, profits still lag behind where they were in 2008. Moreover, last quarter, it gave disappointing guidance for 2013, pointing to expected revenue and profit declines for the fiscal year. Right now, analysts expect a 40% drop in earnings per share this year, with only a muted bounce in fiscal 2014.

Looking forward, the company is trying to join the trend toward cloud computing with its "Creative Cloud" initiative, whereby Adobe will offer monthly subscription packages rather than pricey software licenses. Yet as better-established cloud rivals salesforce.com (NYSE: CRM  ) and IBM (NYSE: IBM  ) build out their offerings, they're likely to come up with products, either on their own or through partnerships with smaller companies, that will compete directly with Adobe's offerings.

In its quarterly report, watch for Adobe to give a status update on its efforts to become a bigger player in the cloud-computing industry. For better or worse, Adobe appears committed to the strategy, and the short-term impact on earnings could lead to more rewarding long-term success if the company can figure out how to beat its new rivals.

Apple has had huge influence in technology for years, but what's less certain is whether Apple's stock remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Click here to add Adobe to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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