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F5 Networks (FFIV) to Post Q3 Earnings: What's in the Cards?

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F5 Networks (FFIV - Free Report) is set to report third-quarter fiscal 2020 results on Jul 27.

For third-quarter fiscal 2020, F5 Networks estimates revenues of $555-$585 million (mid-point $570 million). The Zacks Consensus Estimate for revenues is pegged at $572 million, suggesting year-over-year growth of 1.5%.

The company anticipates non-GAAP earnings of $1.91-$2.13 per share. The Zacks Consensus Estimate has moved a cent over the past week to $2.05 per share. However, the consensus mark indicates a year-over-year decline of 18.7%.

The company’s earnings surpassed estimates in three of the trailing four quarters and missed in the other, the average beat being 4.2%.

Let’s see how things have shaped up for the upcoming announcement.

Factors at Play

The coronavirus crisis is expected to have had a minimal impact on F5 Networks’ business during the fiscal third quarter thanks to its efficient inventory management.

Additionally, the pandemic-induced work-from-home and online-learning wave globally is spurring demand for secured communication networks. We anticipate this new trend to also have positively impacted F5 Networks’ quarterly performance.

F5 Networks is also likely to have benefited from its focus on transitioning the business to a software-driven model. Increasing demand for multi-cloud application services is expected to have been a key driver.

Rising traction of the Enterprise License Agreement (ELA) and annual subscriptions by customers are likely to have boosted software growth. This, in turn, is anticipated to have aided product revenue growth. The Zacks Consensus Estimate for product revenues is pinned at $250 million, suggesting marginal improvement from the year-ago reported figure of $249 million.

Moreover, the top line is likely to have benefited from significant contributions from NGINX, which was acquired by F5 Networks in the third quarter of fiscal 2019.

However, organizations are pushing back their big and expensive technology products due to the slowdown in global economic growth, which might have hurt the company’s fiscal third-quarter revenues. Additionally, as more and more organizations continue shifting to cloud computing owing to the maintenance-free and cost-effective nature, F5 Networks’ hardware business is likely to have seen a declining trend during the quarter under review as well.

What Our Model Says

Our proven model does not predict an earnings beat for F5 Networks this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Though F5 Networks currently carries a Zacks Rank of 2, it has an Earnings ESP of -1.37%.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this season:

Synaptics (SYNA - Free Report) has an Earnings ESP of +10.6% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook has an Earnings ESP of +5.28% and currently carries a Zacks Rank of 3.

Alphabet (GOOGL - Free Report) has an Earnings ESP of +0.32% and carries a Zacks Rank of 3, currently.

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