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Pure Storage (PSTG) to Report Q4 Earnings: What's in Store?

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Pure Storage Inc. (PSTG - Free Report) is scheduled to report fourth-quarter fiscal 2018 earnings on Mar 1. Notably, the company beat the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average positive surprise of 49.67%. Last quarter, the company delivered a positive earnings surprise of 66.7%.

Last quarter, the company reported non-GAAP loss of 1 cent per share, which was narrower than the Zacks Consensus Estimate of a loss of 3 cents. The figure was also much lower than the year-ago loss of 10 cents per share.

Total revenues were $277.7 million, up 41% year over year and ahead of the Zacks Consensus Estimate of $272 million. Revenues surpassed the upper end of the guided range. The company’s strong product portfolio with the likes of FlashArray and FlashBlade business segments bolstered the top line. Additionally, the company’s data platform for cloud is gaining traction.

Management noted that the company is on track to cross the $1 billion mark in annual revenues for fiscal 2018.  We anticipate the company to deliver strong results driven by rapid adoption of its flash-based solutions.

Guidance & Estimates

Pure Storage expects fourth-quarter fiscal 2018 revenues in the range of $327-$335 million. The Zacks Consensus Estimate is pegged at $331.83 million. The next quarter is expected to be first profitable quarter for the company since it went public.

For fiscal 2018, management expects revenues to be in the range of $1.012 billion to $1.02 billion. The Zacks Consensus Estimate is pegged at $1.02 billion.

The Zacks Consensus Estimate for earnings is currently pegged at 7 cents, representing an increase of 450% year over year.

Pure Storage stock has gained 85.9% year over year, outperforming the 22.1% rally of the industry it belongs to.

Factor influencing Q4 results

Pure Storage is rapidly gaining traction in the flash storage market, which is evident from its expanding customer base. During the quarter, it added more than 300 new customers, bringing the total base to 4000 organizations and reflecting an increase of 54% from the year-ago quarter.

Notably, the company’s cloud customers contributed around 25% to business while existing customers contributed 70%. The company’s strong product portfolio with the likes of FlashArray and FlashBlade business segments was the key catalyst. Additionally, its data platform for cloud is gaining traction.

Management is optimistic about its scalable storage solutions in an era when the world is typically being driven by big-data, artificial intelligence (AI) and data analytics based information. The company is currently focusing on three major aspects, namely increasing cloud customer base, solidifying the position of its next generation workload related core data infrastructure and tapping large enterprises as they “cloudify” their on-premise IT infrastructure.

Management is also positive about the company’s partner ecosystem, which assisted it in winning a multimillion dollar deal with a prominent financial services institution.

Management stated that the storage market for AI is likely to witness CAGR of 78% over the next five years. Pure Storage is well poised to seize the opportunity. The company’s partnership with NVIDIA (NVDA - Free Report) , which is a dominant player in AI related computation, is anticipated to be a further positive.

However, the company continues to face intensifying competition due to the presence of major players such as Amazon’s Web Services and Microsoft’s Azure in cloud storage.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pure Storage has a Zacks Rank #3 and an Earnings ESP is 0.00%.

Stocks With Favorable Combination

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Oasis Petroleum Inc. has an Earnings ESP of +7.14% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunrun Inc. (RUN - Free Report) , with an Earnings ESP of +45.00% and a Zacks Rank of 2.

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