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Is a Surprise in Store for Palo Alto (PANW) in Q2 Earnings?

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Palo Alto Networks Inc. (PANW - Free Report) is set to report second-quarter fiscal 2017 results on Feb 28. Last quarter, the company posted a negative earnings surprise of 114.81%. Let us see how things are shaping up for this announcement.

Factors at Play

Palo Alto Networks allows firms, service providers and government bodies to impose tighter security measures through its network security platform. The company reported wider-than-expected loss in the first quarter. Revenues also missed the Zacks Consensus Estimate.

Nonetheless, revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Also, customer wins coupled with expansion of the existing customer base are the other positives. We believe that the company’s product refreshes will boost revenues.

The company is also keen on expanding its cloud exposure. Nevertheless, a volatile spending environment and competition from Cisco Systems, Inc. (CSCO - Free Report) and Check Point Software Technologies Ltd. remain concerns.

Palo Alto Networks, Inc. Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Palo Alto will beat on earnings this quarter. This 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: Earnings ESP for Palo Altois 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 38 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Palo Alto’s Zacks Rank #1 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

The Priceline Group Inc. , with an Earnings ESP of +0.46% and a Zacks Rank #3  You can see the complete list of today’s Zacks #1 Rank stocks here.

Exlservice Holdings, Inc. (EXLS - Free Report) , with an Earnings ESP of +3.85% and a Zacks Rank #2.

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Cisco Systems, Inc. (CSCO) - free report >>

ExlService Holdings, Inc. (EXLS) - free report >>

Palo Alto Networks, Inc. (PANW) - free report >>

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