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Palo Alto (PANW): Disappointment in Store for Q4 Earnings?
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Palo Alto Networks Inc. (PANW - Free Report) is set to report fourth-quarter fiscal 2016 results on Aug 30. Last quarter, the company posted a wider-than-expected loss. Notably, Palo Alto has underperformed the Zacks Consensus Estimate in all of the trailing four quarters with an average negative earnings surprise of 184.61%.
Let us see how things are shaping up for this announcement.
Factors to Consider
Palo Alto Networks allows firms, service providers and government bodies to impose tighter security measures through its network security platform. Near-term prospects for the company are not very promising as the impact of changing customer spending behavior has already been reflected in the quarterly results of several other players in this space.
Over the last few months, it was noted that companies in this space have been breaking their cybersecurity investment plans in phases and implementing the same over a longer duration of time, instead of making a single large investment.
As a result, we are concerned that 2016 spending may fall to 2014 levels. Notably, cybersecurity spending by these companies skyrocketed last year due to a series of high-profile security breaches.
Additionally, in the past few quarters, Palo Alto has been witnessing an increase in operating expenses due to stepped-up investments in research and development, and marketing strategies which have been offsetting the benefit of higher revenues. Intensifying competition and an uncertain macroeconomic environment are other concerns.
Earnings Whispers
Our proven model does not conclusively show that Palo Alto Networks will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Palo Alto is 0.00%. This is because the Most Accurate estimate stands at a loss of 24 cents, in line with the Zacks Consensus Estimate.
Zacks Rank: Currently, Palo Alto carries a Zacks Rank #5 (Strong Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:
Salesforce.com Inc. (CRM - Free Report) , with an Earnings ESP of +20.00% and a Zacks Rank #3.
Hewlett-Packard Enterprise Company (HPE - Free Report) , with an Earnings ESP of +2.27% and a Zacks Rank #3.
Broadcom Limited (AVGO - Free Report) , with an Earnings ESP of +0.87% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Palo Alto (PANW): Disappointment in Store for Q4 Earnings?
Palo Alto Networks Inc. (PANW - Free Report) is set to report fourth-quarter fiscal 2016 results on Aug 30. Last quarter, the company posted a wider-than-expected loss. Notably, Palo Alto has underperformed the Zacks Consensus Estimate in all of the trailing four quarters with an average negative earnings surprise of 184.61%.
Let us see how things are shaping up for this announcement.
Factors to Consider
Palo Alto Networks allows firms, service providers and government bodies to impose tighter security measures through its network security platform. Near-term prospects for the company are not very promising as the impact of changing customer spending behavior has already been reflected in the quarterly results of several other players in this space.
Over the last few months, it was noted that companies in this space have been breaking their cybersecurity investment plans in phases and implementing the same over a longer duration of time, instead of making a single large investment.
As a result, we are concerned that 2016 spending may fall to 2014 levels. Notably, cybersecurity spending by these companies skyrocketed last year due to a series of high-profile security breaches.
Additionally, in the past few quarters, Palo Alto has been witnessing an increase in operating expenses due to stepped-up investments in research and development, and marketing strategies which have been offsetting the benefit of higher revenues. Intensifying competition and an uncertain macroeconomic environment are other concerns.
Earnings Whispers
Our proven model does not conclusively show that Palo Alto Networks will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Palo Alto is 0.00%. This is because the Most Accurate estimate stands at a loss of 24 cents, in line with the Zacks Consensus Estimate.
Zacks Rank: Currently, Palo Alto carries a Zacks Rank #5 (Strong Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
PALO ALTO NETWK Price and EPS Surprise
PALO ALTO NETWK Price and EPS Surprise | PALO ALTO NETWK Quote
Stocks to Consider
Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:
Salesforce.com Inc. (CRM - Free Report) , with an Earnings ESP of +20.00% and a Zacks Rank #3.
Hewlett-Packard Enterprise Company (HPE - Free Report) , with an Earnings ESP of +2.27% and a Zacks Rank #3.
Broadcom Limited (AVGO - Free Report) , with an Earnings ESP of +0.87% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>