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NetApp (NTAP) Set To Report Q4 Earnings: Is A Beat In Store?

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NetApp Inc. (NTAP - Free Report) is scheduled to report fiscal fourth-quarter 2018 results on May 23.

The company has witnessed a remarkable streak of beating earnings estimates. In fact, NetApp surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 11.25%.

In the last reported quarter, the company delivered 2018 non-GAAP earnings of 99 cents per share, beating the Zacks Consensus Estimate by 9 cents. The figure surged 20% on a year-over-year basis and was also above the guided range.

Revenues of $1.52 billion increased 8% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $1.49 billion. The figure was well within the guided range.

Let’s see how things are shaping up prior to this announcement.
 

What Our Model Says

Per the Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP has a good chance of beating estimates.

The Sell-rated stocks (4 or 5) are best avoided, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NetApp has a Zacks Rank #1 and an Earnings ESP of +2.49%, which raises confidence about a possible earnings surprise.You can see the complete list of today’s Zacks #1 Rank stocks here.

Guidance & Estimates

For fourth-quarter fiscal 2018, NetApp expects non-GAAP earnings in the range of 95 cents-$1.03 per share.

We note that the Zacks Consensus Estimate has witnessed upward revision over the past 30 days. The Zacks Consensus Estimate for the current quarter is pegged at $1.01 cents, reflecting a year-over-year increase of 17.44%.

Management anticipates net revenues to be in the range of $1.52-$1.67 billion, which implies growth of 8% at the mid-point from the year-ago quarter. The Zacks Consensus Estimate is pegged at $1.60 billion up approximately 7.7% from the year-ago quarter.

Management remains hopeful of the momentum of its hybrid cloud business. Its differentiated product portfolio and strong distribution channels will keep demand and adoption of the products strong going ahead.

Notably, NetApp stock has returned 75.6% in the past year, outperforming industry’s rally of 26.6%.
 


 

Factors at Play

NetApp is tapping growth areas of the market with its strategic solutions. Revenues from strategic solutions increased 26% on a year-over-year basis in the last reported quarter. This segment comprises around 70% of the company’s product revenues, displaying 17% year-over-year growth.

The company is positive about catering to the exponential rate of data growth with its cloud-integrated all-flash solutions that fit well with hybrid cloud infrastructure. In the last-reported quarter, the company’s all-flash array business surged 50% on a year-over-year basis. Its annualized net revenue run rate was $2 billion.

NetApp’s expertise in the flash array market is aiding its popularity in storage area network (SAN) and converged infrastructure markets. The company’s launch of hyper-converged infrastructure is also anticipated to be a positive for the top line in the to-be-reported quarter.

Moreover, NetApp’s extended partnership with Microsoft (MSFT - Free Report) for the development of the industry’s first cloud-based enterprise Network File System (“NFS”) to be delivered via Azure is anticipated to bolster the top line.

Notably, the Zacks Consensus Estimate for Hardware Maintenance and Other Services revenues is pegged at $374 million. Product revenues are estimated to be $976 million and Software Subscription revenues are anticipated to be around $241 million in fourth-quarter 2018.

NetApp, Inc. Price and EPS Surprise

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

Other Stocks With Favorable Combination

Here are a couple of stocks from the broader technology sector, you may want to consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.

DXC Technology Company (DXC - Free Report) has an Earnings ESP of +1.06% and a Zacks Rank #2.

Box, Inc (BOX - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #3.

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