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Factors Setting the Tone for Smartsheet's (SMAR) Q2 Earnings

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Smartsheet Inc. (SMAR - Free Report) is scheduled to release second-quarter fiscal 2021 results on Sep 2.

For the fiscal second quarter, the company expects revenues between $86 million and $87 million. The Zacks Consensus Estimate for revenues is currently pegged at $86.4 million, which suggests growth of 33.7% from the year-ago reported figure.

Moreover, non-GAAP loss is anticipated in the range of 18-16 cents. The consensus mark for fiscal second quarter loss has been steady at 16 cents per share in the past 30 days. Non-GAAP net loss per share was 8 cents in the second quarter of fiscal 2020.

Notably, the company beat estimates in each of the trailing four quarters, the average surprise being 32.61%.

Factors Likely to Have Influenced Q2 Performance

Coronavirus crisis induced work-from-home and online learning wave is expected to have fueled adoption of Smartsheet’s cloud-based platforms, which facilitate execution of work and aid teams and organizations to plan, automate, manage, and report work.

Smartsheet Inc. Price and EPS Surprise

Smartsheet Inc. Price and EPS Surprise

Smartsheet Inc. price-eps-surprise | Smartsheet Inc. Quote

Solid momentum in Smartdashboards, Smartportals, Smartcards, Smartgrids, Smartprojects, Smartcalendars, Smartforms, Smartautomation and Smartintegrations is likely to have contributed to the fiscal second-quarter revenues.

Moreover, the company’s significant investments in product innovation and its efforts to enhance the reach of their products through advertising campaigns are likely to have aided it in acquiring new customers and retain existing ones in second quarter-fiscal 2021.

The company is also constantly rolling out new product offerings to boost value for customers. Additionally, Smartsheet’s efforts to enter new markets and improve existing product capabilities might have contributed to subscription revenues in the to-be-reported quarter.

Notably, the Zacks Consensus Estimate for subscription revenues for the fiscal second quarter is pegged at $79 million, indicating growth of 35.5% on a year-over-year basis.

In July, the company announced Federal Advisory Board, comprising former federal government executives from defense, civilian and intelligence agencies.  The industry experts will aid the company by offering strategic insights pertaining to market needs in government-domain.

Markedly, the company has received full FedRAMP (Federal Risk and Authorization Management Program) authorization.

These factors are likely to have helped the company in attracting new federal customers and expanding existing federal client base in quarter to be reported.

Further, the global COVID-19 outbreak is likely to have driven momentum for Smartsheet’s offerings due to higher demand for robust data collection and risk assessment capabilities across industries including life sciences, healthcare, finance, technology, and manufacturing.

In the last reported quarter, the company’s dollar net retention rate was 132%. This trend is likely to have continued in the to-be-reported quarter courtesy of the expanded use of Smartsheet’s platform.

Additionally, the company’s expanding international presence might have contributed to fiscal second-quarter performance.

However, Smartsheet’s continued investments in products and additional personnel (although the management noted hiring has slowed down) are likely to have kept margins under pressure in the fiscal second quarter.

Also, higher expenditure on brand advertising, amid stiff competition from Zoho and, may have negatively impacted the company’s profitability in the to-be-reported quarter.

Moreover, COVID-19 led macroeconomic weakness induced reduced spend across small and medium sized business (SMB) limited growth in the fiscal first quarter. This impact is anticipated to have persisted in the quarter to be reported.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Smartsheet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Smartsheet has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release:

Zscaler, Inc. (ZS - Free Report) has an Earnings ESP of +21.74% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH (RH - Free Report) has an Earnings ESP of +13.47% and a Zacks Rank #2.

Signet Jewelers Limited (SIG - Free Report) has an Earnings ESP of +38.82% and a Zacks Rank of 3.

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