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Will Healthy Top-Line Growth Aid Arista (ANET) Q4 Earnings?

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Arista Networks, Inc. (ANET - Free Report) is scheduled to report fourth-quarter 2020 results on Feb 18, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 8.5% with the bottom line surpassing the Zacks Consensus Estimate by 19 cents. Arista delivered a trailing four-quarter positive earnings surprise of 9.5%, on average.

The Santa Clara, CA-based cloud networking company is likely to have recorded higher revenues year over year, supported by overall healthy demand. However, due to COVID-19 adversities, Arista is likely to have experienced some supply-chain issues resulting in extended lead time and constrained shipments.

Factors at Play

During the fourth quarter, Arista introduced next-gen unified edge solutions to its Cognitive Campus portfolio for implementing automated traffic visibility in the campus for a seamless client-to-cloud environment. It capitalizes on EOS –  an advanced network operating system and CloudVision – network management platform, to simplify visualization of workloads and secure campus networks.

Arista also introduced the Attack Surface Assessment, an advanced security service that combines human expertise in digital forensics and incident response with its industry-leading network detection and response technology. Threat assessment focuses on identifying technical risks within the environment; internal and external risk factors that increase the likelihood of a breach; early warning of a potential threat and gaps in incident remediation practices. Such innovative product launches are likely to have translated into top-line growth in the fourth quarter.

For the December quarter, the Zacks Consensus Estimate for revenues is pegged at $629 million, indicating a 13.5% increase from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at $2.40, which suggests an improvement from $2.29 recorded in the year-earlier quarter.

Key Developments in Q4

During the to-be-reported quarter, Arista continued the integration of Awake Security in order to boost its threat detection capabilities across the cloud network traffic. The buyout is likely to add significant value to Arista and complement many of its Endpoint Detection Response offerings. The transaction brings together two leading technology firms with complete situational awareness of customers’ digital assets along with the ability to fully assess and respond to critical threats. In addition to distinct synergies in technology and market opportunity, the deal is based on commonalities in values, culture and philosophies, and is likely to deliver secure cloud networking experience for clients in the future.

Earnings Whispers

Our proven model predicts an earnings beat for Arista this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.01%, with the former pegged at $2.45 and the latter at $2.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote

Zacks Rank: Arista currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

Telephone and Data Systems, Inc. (TDS - Free Report) is set to release quarterly numbers on Feb 18. It has an Earnings ESP of +309.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Cambium Networks Corporation (CMBM - Free Report) is +6.75% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 18.

The Earnings ESP for United States Cellular Corporation (USM - Free Report) is +342.11% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 18.

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