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Analyst Blog

Palo Alto Networks Inc. (PANW - Free Report) is set to report first-quarter fiscal 2017 results on Nov 21. Last quarter, the company posted a negative earnings surprise of 112.5%. Notably, Palo Alto has underperformed the Zacks Consensus Estimate in the trailing four quarters with an average negative earnings surprise of 189.91%.

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. The company reported wider-than-expected loss in the fourth quarter, while revenues comfortably surpassed the Zacks Consensus Estimate.

Revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Also, customer wins coupled with expansion of the existing customer base positively impacted revenues. We believe that the company’s product refreshes will boost revenues, going forward.

The company is also keen on expanding its cloud exposure. Nevertheless, a volatile spending environment and competition from Cisco Systems, Inc. (CSCO - Free Report)   and Check Point Software Technologies Ltd. remain concerns.

PALO ALTO NETWK Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Palo Alto is likely to beat the Zacks Consensus Estimate in its upcoming release. 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Palo Alto is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 27 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Palo Alto has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% % makes surprise prediction difficult.

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.

Stocks to Consider

Here are a couple of stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Marvell Technology Group Ltd. (MRVL - Free Report) , with an Earnings ESP of +40.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

Broadcom Ltd. (AVGO - Free Report) , with an Earnings ESP of +1.74% and a Zacks Rank #3

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