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NetApp (NTAP) to Post Q2 Earnings: What's in the Cards?

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NetApp Inc. (NTAP - Free Report) is set to report second-quarter fiscal 2017 results on Nov 16. Last quarter, the company reported a positive earnings surprise of 55.56%. We note that the company has beaten the Zacks Consensus Estimate in three out of last four trailing quarters, with an average positive surprise of 14.52%.

Let’s see how things are shaping up prior to this announcement.

NETAPP INC Price and EPS Surprise

NETAPP INC Price and EPS Surprise | NETAPP INC Quote

Factors to Consider

NetApp is expected to gain momentum in the flash-based solutions space, with the newly introduced all-flash array. The company has been recognized a Leader in the 2016 Gartner Magic Quadrant for Solid-State Arrays. Additionally, the company’s improving penetration at the mid-size business segment is positive.

We believe that NetApp’s recent product launches and expanding product portfolio will drive top-line growth in the near term.

Further, the company is focused on consolidating its international footprint. The appointment of Fredy Cheung as area vice president, Greater China, is anticipated to boost NetApp’s market share in the country.

However, tepid IT spending for the rest 2016 raises concerns about the company’s near-term performance. Intensifying competition from Western Digital (WDC - Free Report) and HP Inc. add to its woes.

Earnings Whispers

Our proven model does not conclusively show that NetApp will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at -2.63%. This is because the Most Accurate estimate of 37 cents is lower than the Zacks Consensus Estimate of 38 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NetApp has a Zacks Rank #3, which increases the predictive power of ESP. However, the negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a couple of stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Wal-Mart Stores (WMT - Free Report) , with an Earnings ESP of +1.04% and a Zacks Rank #3.

Best Buy (BBY - Free Report) , with an Earnings ESP of +4.26% and a Zacks Rank #1.

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