Cray (CRAY) Reports Third Quarter Loss, Highest Revenue Estimate

Cray (CRAY) reported quarterly loss of $0.47 per share versus the Zacks Consensus Estimate of a loss of $0.44. For comparison, a year earlier the loss was $0.33 per share. These numbers have been adjusted for one-off items.

This quarterly report showed an earnings surprise of -6.82%. A quarter ago, it was expected that this supercomputer maker would post a loss of $0.35 per share when it actually produced a loss of $0.20, delivering a surprise of 42.86%.

Over the last four quarters, the company has surpassed consensus EPS estimates only once.

Cray, which belongs to the Zacks Computer – Mainframe industry, posted revenues of $92.80 million for the quarter ended September 2018, surpassing the Zacks Consensus Estimate by 2.31%. For comparison, revenues from the previous year amounted to USD 79.70 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will largely depend on management’s commentary on the earnings call.

Cray shares have lost about 19.3% year to date, compared with the S&P 500’s decline of -1.2%.

What’s next for Cray?

While Cray has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Leading up to the earnings release, Cray’s estimate revision trends were mixed. While the magnitude and direction of estimate revisions may change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) stock. Therefore, the company’s stock is expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $0.22 on revenue of $160.80 million for the coming quarter and -$0.87 on revenue of $451.30 million for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, Mainframe is currently in the top 43% of over 250 Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

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