Adobe Systems (ADBE) is scheduled to report their fiscal third quarter 2009 results after the market closes on Tuesday, September 15th. Based on our analysis, we at EarningsPreviews.com are expecting Adobe to report slightly better than expected results that exceed Wall Street's consensus expectations.

Analyst Expectations

We are forecasting revenues of $686.4 million and EPS of $.35. This would represent a 23% decrease in revenues from last year's $887.3 million in the same period. The current analyst consensus estimates calls for revenues of $686.1 million and EPS of $.34. On June 16, the company provided fiscal third quarter revenue guidance of $665 - $715 million and $.30 - $.37 non-GAAP EPS.

We are anticipating that Adobe Systems will post its fifth consecutive quarter with y/y declines in revenue. Economic pressures continue to weigh on business performance which is likely to be compounded by traditionally weak summer seasonality. However, we believe that revenues could inch sequentially higher from last quarter's level, but that probably won't be enough to move the stock significantly.

Adobe's stock has nearly doubled since falling below $16 in early March and now stands near their highest level of the year. In the absence of a blow-out quarter, we would expect the company to provide fourth quarter guidance that is inline with the Street's current estimates.  

Stock Performance

Since the beginning of 2009, Adobe System's shares have gained over 54% and have outperformed the 8% gain in the Dow Jones Industrial average. Last year, ADBE's stock fell 50% and underperformed the 34% drop in the Dow Jones Industrial average.

Valuation

Shares are now trading at 20x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. Given the stock's big rally over the last 6 months, we would anticipate a pullback before year end.

Recommendation: Hold with a $30 price target.