Back to top

Image: Bigstock

What's in the Cards for Proofpoint (PFPT) in Q2 Earnings?

Read MoreHide Full Article

Proofpoint, Inc. is set to report second-quarter 2017 results on Jul 27. Last quarter, the company reported a loss (including stock based compensation) of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 35 cents.

The company has a mixed track record of earnings surprises. In the trailing four quarters, the stock surpassed the Zacks Consensus Estimate twice while missing the same on the other two occasions, delivering an average positive surprise of 8.68%.

Proofpoint stock has gained 29.7% year to date, outperforming the 20.6% rally of the industry it belongs to.



Let's see how things are shaping up for this announcement.

Factors at Play

Proofpoint is a leading security-as-a-service provider, which focuses on cloud-based solutions for threat protection, compliance, archiving & governance, and secure communications.

According to a Markets and Markets report, the cyber security market will touch $202.36 billion in 2021 from $122.45 billion in 2016, representing a compounded annual growth rate of 10.6%. The favorable trend in the space is likely to aid Proofpoint’s second-quarter results.

Although Proofpoint witnessed remarkable top-line growth on the back of consistent focus on launching products, acquisitions and partnerships, the company has failed to deliver on the bottom line.

It should be noted that Proofpoint has invested heavily to enhance its sales and marketing capabilities, particularly by expanding the company’s sales force to survive in the highly competitive cyber security market. Notably, the company’s expenses escalated approximately three-fold to $461 million in 2016 from $124 million in 2012. This affected Proofpoint’s bottom-line performance.

Since Proofpoint continues to invest in sales and marketing, we anticipate this to remain a drag on the company’s second-quarter bottom line.

The company anticipates revenues in the range of $118–120 million and billings between $141 million and $143 million. Further, Proofpoint expects to incur loss in the range of 61–69 cents per share on a GAAP basis, while on a non-GAAP basis, earnings are estimated between 11 cents and 13 cents.

Proofpoint, Inc. Price and EPS Surprise

Proofpoint, Inc. Price and EPS Surprise | Proofpoint, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Proofpoint is likely to beat earnings estimates 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. This is not the case here as you will see below:

Zacks ESP: Proofpoint’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 26 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Proofpoint’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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 That Warrant a Look

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

Kemet Corporation (KEM - Free Report) with an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

SBA Communications Corporation (SBAC - Free Report) with an Earnings ESP of +10% and a Zacks Rank #1.

Vishay Intertechnology, Inc. (VSH - Free Report) with an Earnings ESP of +6.06% and a Zacks Rank #1.

More Stock News: Tech Opportunity Worth $386 Billion in 2017
 
From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without.

Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future. Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>

Published in