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Palo Alto (PANW) to Report Q3 Earnings: What's in Store?

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Palo Alto Networks (PANW - Free Report) is scheduled to release third-quarter fiscal 2021 results on May 20.

The company projects year-over-year revenue growth of 21-22% to $1.05-$1.06 billion. The Zacks Consensus Estimate for the same is pegged at $1.06 billion, suggesting a 21.66% increase from the year-ago quarter.

The company anticipates non-GAAP earnings of $1.27-$1.29 per share. The consensus mark for the same is pegged at $1.28 per share, indicating a year-over-year climb of 9.4%.

The company’s earnings beat estimates in the trailing four quarters, the average surprise being 15.9%.

Let’s see how things have shaped up prior to the announcement.

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. price-eps-surprise | Palo Alto Networks, Inc. Quote

Factors at Play

Amid the COVID-led continued remote-working wave, increased use of the cloud and remote networks has given rise to escalating sophisticated cyberattacks. This has led to a rise in demand for cybersecurity solutions. Palo Alto’s fiscal third-quarter results are likely to have benefited from this demand surge.

Moreover, the company’s earnings are likely to have been aided by the strong momentum for deal wins, which in turn are likely to have boosted revenue growth.

Palo Alto is also gaining from the acquisition of Redlock, which forms the basis of the Prisma public cloud, and Demisto, which forms the basis of Cortex. Prisma and Cortex are likely to have performed well during the fiscal third quarter, which is a positive for billings.

The growing and accelerated migration to cloud, owing to the social-distancing regulations, is likely to have bolstered the adoption of the aforementioned platforms. Notably, the company expects year-over-year billings growth between 20% and 22% ($1.22 billion-$1.24 billion) for the to-be-reported quarter.

Nonetheless, high expenses related to the acquisition of Bridgecrew in March are likely to have dragged down margins.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Palo Alto 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. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Palo Alto currently has a Zacks Rank of 3 and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

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

HP Inc. (HPQ - Free Report) has an Earnings ESP of +4.49% and currently, a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #2, at present.

Pure Storage, Inc. (PSTG - Free Report) has an Earnings ESP of +10.81% and currently, a Zacks Rank #2.

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