AVG Technologies (AVG) Q2 Earnings: What's In The Cards?

AVG Technologies N.V. (NYSE:AVG) is anticipated to report second-quarter 2016 results on Aug 3. Last quarter, the company posted a positive earnings surprise of 2.70%.

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

Factors to Consider

AVG Technologies offers antivirus and Internet security products. Despite persistent macro uncertainty, the company appears positive on the back of a strong product line-up, deal wins and investment plans which should boost results in the to-be-reported quarter.

Additionally, AVG Technologies closed a number of acquisitions last year, the biggest being that of Location Labs in terms of value. Synergies from these acquisitions are expected to provide significant tailwinds.

Nonetheless, near-term prospects for AVG Technologies are not quite promising as changing customer spending behavior has already hit several other players in this space.

During the second quarter, various competitors in the cyber security space noticed that the companies have been breaking their cybersecurity investment plans in phases and implementing the same over time, instead of making a single large investment.

As a result, we are concerned that 2016 spending may fall to 2014 levels. Notably, cybersecurity spending by similar companies skyrocketed last year due to a series of high-profile security breaches.

Furthermore, competitive pressure from the likes of Symantec Corporation (NASDAQ:SYMC) and currency headwinds could dampen the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that AVG Technologies will beat estimates this quarter. That is because 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. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for AVG Technologies is 0.00%. This is because the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 40 cents.

Zacks Rank: AVG Technologies’ Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.

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

Stocks to Consider

Here are a couple of stocks that you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Mercury Systems Inc. (NASDAQ:MRCY) , with an Earnings ESP of +26.67% and a Zacks Rank #3.

Paycom Software Inc. (NYSE:PAYC) , with an Earnings ESP of +7.69% and a Zacks Rank #3.