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NetApp (NTAP) Up 5.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for NetApp (NTAP - Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NetApp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
NetApp Q4 Earnings Top Estimates
NetApp reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.54 per share, which surpassed the Zacks Consensus Estimate by 14.1%. The bottom line increased 8.5% year over year. Management anticipated non-GAAP earnings in the range of $1.30-$1.40 per share.
Revenues of $1.58 billion decreased 6% and 4%, on a reported basis and in constant currency, respectively, year over year. NTAP projected revenues in the range of $1.475-$1.625 billion. Revenues beat the consensus mark by 2.4%.
NetApp now expects fiscal 2024 revenues to decline in the low-to-mid single digits range on a year-over-year basis. Weakening IT spending environment and cloud cost optimization amid macroeconomic turbulence weigh on the performance along with forex volatility. Management believes that these are temporary headwinds and expects IT spending to rebound in time.
The company anticipates non-GAAP earnings for fiscal 2024 to be between $5.65 per share and $5.85 per share.
For fiscal 2024, NetApp expects non-GAAP gross margin to be nearly 70% and non-GAAP operating margin to be nearly 25%.
Top-Line Details
NetApp introduced two segments for financial reporting, namely, Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment consists of revenues from enterprise datacenter business, which include product, support and professional services.
The Public Cloud segment consists of revenues from products, which are delivered as-a-service and include related support. The portfolio includes cloud automation and optimization services, storage services and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment were down 8% year over year to $1.43 billion. The Public Cloud segment’s revenues were up 25.8% from the year-ago quarter’s levels to $151 million.
Within the Hybrid Cloud segment, Product revenues (52% of segmental revenues) decreased 16.8% year over year to $744 million.
Revenues from Support Contracts (41.8%) totaled $598 million, up 1.4% year over year. Professional and Other Services revenues (6.2%) were $88 million, rose 15.8% year over year.
Software product revenues amounted to $437 million, down 17.5%.
Region-wise, the Americas, Europe, the Middle East and Africa and the Asia Pacific contributed 52%, 34% and 14% to total revenues, respectively.
Direct and Indirect revenues contributed 22% and 78%, respectively, to total revenues.
Key Metrics
During the fiscal fourth quarter, the company’s All-Flash Array Business’ annualized net revenue run rate was $3.1 billion, down 4% year over year. Total billings decreased 17% year over year to $1.7 billion. Deferred revenues were $4.3 billion, up 2% year over year.
Public Cloud Services recorded annualized recurring revenues (ARR) of $620 million, up 23% year over year, driven by strength in Public Cloud storage services.
Operating Details
Non-GAAP gross margin was 69%, expanded 330 basis points (bps) from the year-ago quarter’s levels.
The Hybrid segment’s gross margin was 69.4%, which expanded 400 bps year over year. The Public Cloud segment’s gross margin was 65.6%, which contracted 270 bps year over year.
Non-GAAP operating expenses were down 6.1% year over year to $677 million. As a percentage of net revenues, the figure remained flat on a year-over-year basis to 42.9%.
Non-GAAP operating income increased 8.4% year over year to $414 million. Non-GAAP operating margin expanded 350 bps to 26.2%.
Balance Sheet & Cash Flow
NetApp exited the quarter ending Apr 28, 2023, with $3.07 billion in cash, cash equivalents and investments compared with $3.141 billion as of Jan 27. Long-term debt was $2.389 billion compared with $2.388 billion as of Jan 27.
Net cash from operations was $235 million during the reported quarter compared with $377 million in the previous quarter.
Free cash flow was $196 million (free cash flow margin of 12.4%) compared with $319 million in the previous quarter (free cash flow margin of 20.9%).
The company returned $256 million to shareholders as dividend payouts and share repurchases in the fiscal fourth quarter.
NTAP also announced a dividend of 50 cents payable on Jul 26, to shareholders of record as of the close of business on Jul 7.
Q1 2024 Guidance
Management projects non-GAAP earnings to be between $1.00 per share and $1.10 per share. Net revenues are anticipated to be in the range of $1.325-$1.475 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -15.44% due to these changes.
VGM Scores
At this time, NetApp has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NetApp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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NetApp (NTAP) Up 5.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for NetApp (NTAP - Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NetApp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
NetApp Q4 Earnings Top Estimates
NetApp reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.54 per share, which surpassed the Zacks Consensus Estimate by 14.1%. The bottom line increased 8.5% year over year. Management anticipated non-GAAP earnings in the range of $1.30-$1.40 per share.
Revenues of $1.58 billion decreased 6% and 4%, on a reported basis and in constant currency, respectively, year over year. NTAP projected revenues in the range of $1.475-$1.625 billion. Revenues beat the consensus mark by 2.4%.
NetApp now expects fiscal 2024 revenues to decline in the low-to-mid single digits range on a year-over-year basis. Weakening IT spending environment and cloud cost optimization amid macroeconomic turbulence weigh on the performance along with forex volatility. Management believes that these are temporary headwinds and expects IT spending to rebound in time.
The company anticipates non-GAAP earnings for fiscal 2024 to be between $5.65 per share and $5.85 per share.
For fiscal 2024, NetApp expects non-GAAP gross margin to be nearly 70% and non-GAAP operating margin to be nearly 25%.
Top-Line Details
NetApp introduced two segments for financial reporting, namely, Hybrid Cloud and Public Cloud.
The Hybrid Cloud segment consists of revenues from enterprise datacenter business, which include product, support and professional services.
The Public Cloud segment consists of revenues from products, which are delivered as-a-service and include related support. The portfolio includes cloud automation and optimization services, storage services and cloud infrastructure monitoring services.
Revenues from the Hybrid Cloud segment were down 8% year over year to $1.43 billion. The Public Cloud segment’s revenues were up 25.8% from the year-ago quarter’s levels to $151 million.
Within the Hybrid Cloud segment, Product revenues (52% of segmental revenues) decreased 16.8% year over year to $744 million.
Revenues from Support Contracts (41.8%) totaled $598 million, up 1.4% year over year. Professional and Other Services revenues (6.2%) were $88 million, rose 15.8% year over year.
Software product revenues amounted to $437 million, down 17.5%.
Region-wise, the Americas, Europe, the Middle East and Africa and the Asia Pacific contributed 52%, 34% and 14% to total revenues, respectively.
Direct and Indirect revenues contributed 22% and 78%, respectively, to total revenues.
Key Metrics
During the fiscal fourth quarter, the company’s All-Flash Array Business’ annualized net revenue run rate was $3.1 billion, down 4% year over year. Total billings decreased 17% year over year to $1.7 billion. Deferred revenues were $4.3 billion, up 2% year over year.
Public Cloud Services recorded annualized recurring revenues (ARR) of $620 million, up 23% year over year, driven by strength in Public Cloud storage services.
Operating Details
Non-GAAP gross margin was 69%, expanded 330 basis points (bps) from the year-ago quarter’s levels.
The Hybrid segment’s gross margin was 69.4%, which expanded 400 bps year over year. The Public Cloud segment’s gross margin was 65.6%, which contracted 270 bps year over year.
Non-GAAP operating expenses were down 6.1% year over year to $677 million. As a percentage of net revenues, the figure remained flat on a year-over-year basis to 42.9%.
Non-GAAP operating income increased 8.4% year over year to $414 million. Non-GAAP operating margin expanded 350 bps to 26.2%.
Balance Sheet & Cash Flow
NetApp exited the quarter ending Apr 28, 2023, with $3.07 billion in cash, cash equivalents and investments compared with $3.141 billion as of Jan 27. Long-term debt was $2.389 billion compared with $2.388 billion as of Jan 27.
Net cash from operations was $235 million during the reported quarter compared with $377 million in the previous quarter.
Free cash flow was $196 million (free cash flow margin of 12.4%) compared with $319 million in the previous quarter (free cash flow margin of 20.9%).
The company returned $256 million to shareholders as dividend payouts and share repurchases in the fiscal fourth quarter.
NTAP also announced a dividend of 50 cents payable on Jul 26, to shareholders of record as of the close of business on Jul 7.
Q1 2024 Guidance
Management projects non-GAAP earnings to be between $1.00 per share and $1.10 per share. Net revenues are anticipated to be in the range of $1.325-$1.475 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -15.44% due to these changes.
VGM Scores
At this time, NetApp has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NetApp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.