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Tickers in this Article: CA
On Thursday, October 25, 2012, CA (Nasdaq:CA) is expected to release its second quarter earnings.

In most situations, when earnings do not meet analyst estimates, a business' stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge. SEE: Surprising Earnings Results

What to Expect: Analysts are expecting CA to report earnings of 55 cents per share, up 7.8% from a year ago, when the company reported earnings of 51 cents per share.

The consensus estimate, while unchanged in the past month, is down from 57 cents three months ago. For the fiscal year, analysts are projecting earnings of $2.34 per share.

Revenue of $4.76 billion is expected for the fiscal year.

Company Performance: In the first quarter, revenue decreased year-over-year to break a two-quarter growth streak. It fell 1.5% in the first quarter after rising 11.8% in the fourth quarter of the last fiscal year and 8.4% in the third quarter of the last fiscal year.

CA has a P/E ratio of 12.4, high compared to the industry average of 3.23. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock

Since July 24, 2012, the stock price has fallen 3.6% to $24.51 from $25.43. The stock saw one of its worst stretches when its price fell $2.34 per share between September 12, 2012 and October 12, 2012.

The Competition: CA is an information technology software and service company that helps organizations manage and secure their IT infrastructures and services. Most analysts (eight of 10) give CA a hold rating. This marks a small improvement, as the number of buy ratings has risen slightly over the past three months.

The company's closest competitor in the software and programming industry is Microsoft (MSFT). Analysts are less optimistic about CA than about Microsoft. Twenty out of 29 analysts rate the latter a buy compared to two of 10 for the former.

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