Profit increase sends Adobe to record high

Number of subscribers to its Creative Cloud service leap

Adobe shares rose to a record high on Wednesday after results from the company eclipsed Wall Street forecasts, triggering price target increases from at least a dozen investment banks.

The software maker said profits rose 16 per cent from a year earlier to $88.5m, or 17 cents a share, in the three months to May 30, as sales advanced 6 per cent to $1.07bn.

Adjusting for certain items, Adobe said it earned 37 cents a share, ahead of Wall Street expectations.

The number of subscribers to the company’s Creative Cloud service – which gives customers access to Photoshop and other programmes for a monthly fee – jumped 464,000 since the first quarter to 2.3m.

At least a dozen investment banks increased their price targets following the results, which were released after the market closed on Tuesday.

Analysts with Citi said they expected the quarter to be “transitional”, but instead were pleasantly surprised.

“While Creative Cloud strength was again helped by the Photoshop/Lightroom promo, full suite adds accelerated in the second quarter, suggesting that it wasn’t all promo that drove results,” said analyst Walter Pritchard.

Adobe shares rose 8.2 per cent to close at $73.08, leading the benchmark S&P 500.

FedEx delivered guidance for its current fiscal year that was on target with analysts’ expectations.

The US-based transportation and delivery service said its earnings projections for the 2015 financial year were for between $8.50 and $9 per diluted share.

Analysts polled by Bloomberg expected EPS to be close to the midpoint of this guidance, at $8.76.

FedEx’s fourth-quarter numbers came in ahead of Wall Street expectations. It reported earnings of $2.46 per diluted share on revenues of $11.8bn. Analysts expected EPS of $2.36 on revenues of $11.66bn.

FedEx’s shares closed up 6.16 per cent at $148.95.

Company executives raised their economic forecasts for 2015. They now project US GDP growth of 3.1 per cent in 2015, compared to 3 per cent previously, and global GDP to rise 3.1 per cent.

Wall Street economists on average expect US GDP to climb 3 per cent in 2015 compared to a year earlier.

On a call with analysts, executive vice-president T Michael Glenn said: “The global economy is recovering from the first-quarter setback in the US and slowdown in China and should steadily improve.”

Shares in BlackBerry were just under 3 per cent higher to end at $8.29 after Morgan Stanley analyst James Faucette said BlackBerry’s new management would probably preserve asset value and balance sheet flexibility.

Mr Faucette expects chief executive John Chen to scale back operations soon and quickly improve cash flow, adding that he believed the stock had a fair value of between $6 and $8.

“The company’s business clearly continues to deteriorate and we expect that the company will be compelled to expand its expense cutting programmes as our forecasts don’t anticipate that new products will gain meaningful traction,” Mr Faucette said.

Shares in Express Scripts fell 2.23 per cent to $68.29 following news that its chief executive, George Paz, had sold about 26 per cent of his holdings.

The shares were sold on Friday for $48m and were part of an investment diversification strategy, the company said.

Wall Street’s main indices closed slightly higher. The Dow Jones Industrial Average rose 0.58 per cent to 16,906.62; the S&P 500 was up 0.77 per cent to 1,956.98 and the Nasdaq Composite was 0.59 per cent higher to end the day at 4,362.84.

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