A month has gone by since the last earnings report for Box (BOX Quick QuoteBOX - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Box 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 drivers.

Box Q3 Earnings Lag Estimates

Box reported third-quarter fiscal 2024 non-GAAP earnings per share of 36 cents, which missed the Zacks Consensus Estimate by 5.3%. The figure jumped 16.2% year over year.

Total revenues of $261.54 million lagged the consensus mark of $262.03 million. The top line increased 5% year over year (7% growth on a constant currency basis).

Solid momentum in the Content Cloud platform and the growing adoption of Enterprise Plus Suites drove top-line growth.

Continuous product enhancements and the growing momentum of Box AI were a positive.

However, macroeconomic concerns continue to impact IT spending negatively.

Quarter in Detail

Billings were $254 million for the reported quarter, decreasing 2% year over year (2% growth on a constant currency basis).

Deferred revenues were $472 million in the fiscal third quarter, increasing 1% from the prior fiscal-year quarter’s reading (2% growth on a constant currency basis).

BOX saw a 79% attach rate for its Suites, up 600 basis points (bps) year over year. Moreover, 51% of revenues came from Suites, expanding 900 bps year over year.

Box’s net retention rate was 102% at the end of the fiscal third quarter, down 800 bps year over year due to macroeconomic challenges.

The remaining performance obligations for the reported quarter were $1.13 billion, up 7% on a year-over-year basis (8% growth on a constant currency basis).

Operating Results

Non-GAAP gross margin was 76.3%, contracting 20 bps from the same-quarter level in the previous year.

Box’s operating expenses of $180.9 million increased by 5.1% year over year. As a percentage of revenues, the figure expanded 30 bps from the year-ago quarter’s level to 69.2%.

On a non-GAAP basis, the company recorded an operating margin of 24.7%, which expanded by 70 bps from the prior-year quarter’s level.

Balance Sheet & Cash Flow

As of Oct 31, 2023, cash and cash equivalents were $377.9 million, down from $395.9 million as of Jul 31, 2023.

BOX’s short-term investments amounted to $61.8 million, up from $49.4 million in the previous fiscal quarter.

Accounts receivables amounted to $166.9 million at the end of the fiscal third quarter, which increased from $165.4 million at the end of the prior fiscal quarter.

Non-current debt was pegged at $370.3 million at the reported quarter’s end compared with $369.82 million at the previous quarter’s end.

Box generated $71.8 million in cash from operations in the fiscal third quarter, down from $32.7 million in the previous fiscal quarter.

BOX generated a free cash flow of $58.3 million in the fiscal third quarter.

Guidance

For fourth-quarter fiscal 2024, Box expects revenues between $262 million and $264 million, suggesting a 3% rise at the high end of the range from the prior fiscal year’s reported figure. The constant currency growth rate is pegged at 5%.

On a non-GAAP basis, BOX projects earnings per share in the range of 38-39 cents. The guidance includes an expected foreign exchange headwind of 3 cents.

The non-GAAP operating margin for the fiscal fourth quarter is expected to be 25.5%.

For fiscal 2024, the company trimmed its revenue guidance from $1.040-$1.044 billion to $1.037-$1.039 billion, indicating an increase of 5% from the last fiscal year’s reading at the high end of the range. The constant currency growth rate is pegged at 8%.

BOX also updated its guidance for non-GAAP earnings per share, which is now expected in the band of $1.42-$1.43, including an expected foreign exchange headwind of 17 cents. Previous guidance for the same was $1.46-$1.50.

The non-GAAP operating margin for the full fiscal year is expected to be 24.5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -63.64% due to these changes.

VGM Scores

At this time, Box has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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, Box has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Box is part of the Zacks Internet - Software industry. Over the past month, Workday (WDAY Quick QuoteWDAY - Free Report) , a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended October 2023 more than a month ago.

Workday reported revenues of $1.87 billion in the last reported quarter, representing a year-over-year change of +16.7%. EPS of $1.53 for the same period compares with $0.99 a year ago.

For the current quarter, Workday is expected to post earnings of $1.44 per share, indicating a change of +45.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.5% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Workday. Also, the stock has a VGM Score of D.