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Citrix Systems Inc. (CTXS - Analyst Report) is slated to release its third-quarter 2012 results on Wednesday, October 24, after the closing bell. The current Zacks Consensus Estimate for the third quarter is pegged at 49 cents, representing a growth of 0.77% from the year-ago quarter.

With respect to earnings surprise, Citrix has outperformed the Zacks Consensus Estimate in all the last four quarters with an average beat of 9.54%

Second-Quarter Performance

On July 26, 2012, Citrix declared its financial results for the second quarter of fiscal 2012 beating the Zacks Consensus Estimates. GAAP net income, in second-quarter 2012, was $92 million or 49 cents per share compared with $81.9 million or 43 cents per share in the prior-year quarter. Quarterly adjusted earnings per share of 56 cents were miles ahead of the Zacks Consensus Estimate of 47 cents.

Second-quarter net revenue was $615.2 million, up 15.9% year over year, beating the Zacks Consensus Estimate of $613 million. Gross margin in the second quarter of 2012 was 84.7% compared with 86.5% in the year-ago quarter. Quarterly operating margin was 13.4% compared with 18% in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, out of 16 estimates there were no estimate revisions in either direction for the third and fourth quarter of 2012. Likewise, out of 16 estimates there were no revisions in either direction for 2012. However, for  2013, out of 16 estimates, two estimates saw downward rivision.

Magnitude of Estimate Revisions

Over the last 30 days, the current Zacks Consensus Estimate has remained in line with the previous EPS estimate of 49 cents and 68 cents, respectively.

Similarly, for fiscal 2012, the current Zacks Consensus Estimate was in line with the previous EPS estimate of $2.15. However, for fiscal 2013, the current EPS estimate was a penny below the earlier estimate of $2.52

Our Take

We believe that the continuous launch of applications for business clients coupled with huge growth opportunity in virtualization and cloud computing market will act as a positive catalyst for the company going forward. However, sluggish economic growth coupled with stiff competition from Vmware, Inc. (VMW - Snapshot Report) may act as headwinds for the company going forward. Additionally, high cost associated with virtualization may restrict the long-term prospect of Citrix.

Currently, Citrix Systems has a Zacks #4 Rank, implying a short-term Sell rating on the stock. 

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