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Citrix Systems Inc. (CTXS - Analyst Report) is scheduled to release its fourth quarter 2011 results on Wednesday, January 25, after the closing bell. The current Zacks Consensus Estimate for the fourth quarter is pegged at 65 cents, representing an annualized growth of 18.42%.

With respect to earnings surprises over the trailing four quarters, Citrix Systems has outperformed the Zacks Consensus Estimate in all the four quarters. The average earnings surprise was a positive 12.83%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude during the same period.

Third Quarter Recap

On October 27, 2011, Citrix Systems reported its third quarter 2011 financial results.

Quarterly net revenue was $565.3 million, up 20% year over year and ahead of the Zacks Consensus Estimate of $545 million. GAAP net income was $92.2 million or 49 cents per share compared with $87.8 million or 46 cents per share in the prior-year quarter. However, quarterly adjusted EPS of 64 cents was well above the Zacks Consensus Estimate of 46 cents.

Gross margin in the third quarter of 2011 was 86.4% compared with 87.8% in the year-ago quarter. However, quarterly operating margin was 18.5% compared with 17.3% in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the 15 analysts covering the stock, one analyst increased the estimate for the fourth quarter of 2011 while none reduced the estimates. However, for the first quarter of fiscal 2012, only one analyst reduced the EPS estimate.

For fiscal 2011, in the last 30 days, out of the 15 analysts covering the stock, one analyst increased the EPS estimate but none decreased the same while for fiscal 2012, out of the 15 analysts covering the stock, one analyst raised the EPS estimate and one slashed the estimate.

Magnitude of Estimate Revisions

During the last 30 days, the current Zacks Consensus Estimates were in line with the previous estimates of 65 cents and 44 cents, respectively, for the ongoing quarter and the first quarter of fiscal 2012.

However, for fiscal 2011, during the last 30 days, the current Zacks Consensus Estimate was just a penny short of the earlier estimate of $2.09. For fiscal 2012, the current Zacks Consensus Estimate was a penny above the previous estimate of $2.33.

Earning Surprises

The current Zacks Consensus Estimates for the ongoing quarter reflects a 0.00% upside potential but the upcoming quarter contains a 2.22% downside potential (essentially a proxy for future earning surprises). Similarly, fiscal 2011 has a 0.00% upside potential while for 2012, the Zacks Consensus Estimate reflects a 1.28% growth potential.

Our Recommendation

Strong financial outlook, increased demand for desktop virtualization led by XenDesktop and other new product launch will propel growth for the company going forward. However, deteriorating economy coupled with stiff competition from VMware, Inc. (VMW - Snapshot Report) will act as a headwind for the company going forward. We, thus, maintain our long-term Neutral recommendation for Citrix Systems.

Currently, Citrix Systems has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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