What's in Store for Fortinet (FTNT) this Earnings Season?


Fortinet Inc. (FTNT - Free Report) is set to report second-quarter 2015 results on Jul 22. Last quarter, the company’s earnings of a penny surpassed the Zacks Consensus Estimate of breakeven results. We expect the company to continue its upbeat performance in the second quarter.

Why a Likely Positive Surprise?  

Our proven model shows that Fortinet is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +100.00%. This is very meaningful and a leading indicator of a likely earnings surprise.

Zacks Rank: Fortinet has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Fortinet’s Zacks Rank #3 and +11.11% ESP makes us very confident in looking for an earnings beat.

What's Driving the Better-than-Expected Earnings?

Fortinet offers network security solutions, including firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration. Despite the continuing macro uncertainty, the company seems positive on the back of a healthy network security market, strong product line-up, deal wins and investment plans which should boost results in the to-be-reported quarter.

The demand for cyber security is on the rise and the previous quarterly results show that Fortinet is gaining from it. Notably, the company has been witnessing a higher number of large deal signings in the past few quarters which we expect to positively impact results in the to-be-reported quarter.

With the advancement in technology, more organizations are adopting a bring-your-own-device ("BYOD") policy, which has enhanced employee productivity with anytime, anywhere access, while making it all the more necessary for the organizations to enforce data security measures.

Furthermore, since the beginning of 2015, numerous data breaches at high-profile business houses and government agencies prompted the need to impose tighter security measures, which in turn boosted the demand for cyber security products.

Per Gartner, worldwide spending on IT security in 2014 was about $70 billion and is likely to reach $76.9 billion in 2015. All these factors are likely to aid Fortinet’s second-quarter results.

Other Stocks to Consider

Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Amazon.com Inc. (AMZN - Free Report) , with an Earnings ESP of +33.33% and a Zacks Rank #2.

Apple Inc. (AAPL - Free Report) , with an Earnings ESP of +2.78% and a Zacks Rank #2.

Microsoft Corp. (MSFT - Free Report) , with an Earnings ESP of +1.79% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>