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What's in Store for Fortinet (FTNT) this Earnings Season?
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Fortinet Inc. (FTNT - Free Report) is set to report first-quarter 2017 results on Apr 27. Last quarter, the company posted a remarkable positive earnings surprise of 125%. Notably, Fortinet has outperformed the Zacks Consensus Estimate thrice and missed in one occasion, over the trailing four quarters. It has an average negative earnings surprise of 47.92%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Fortinet’s network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration.
For the last two quarters, there has been a slowdown in Fortinet’s sales. The company observed that organizations have been breaking their cybersecurity investment plans into phases and implementing the same over longer periods of time instead of making a single large investment. Therefore, the aforementioned factor is likely to affect the to-be-reported quarter revenues.
Nonetheless, we opine that Fortinet’s initiative to change its business model to subscription-based service provider will continue to drive the company’s bottom-line results. Subscription-based service is a high gross margin business (approximately 80%) compared with the hardware-centric model.
Notably, the company generates over 50% of the total revenue from these services, which helped it generate a 250 basis points gross margin expansion in fourth-quarter 2016. We believe that the strategy will continue to improve the company’s bottom-line performances.
Our proven model does not conclusively show that Fortinet 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: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 2 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Fortinet carries 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 and 5 (Sell rated) 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:
Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +3.77%, and a Zacks Rank #2.
Fiserv Inc. , with an Earnings ESP of +0.85% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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What's in Store for Fortinet (FTNT) this Earnings Season?
Fortinet Inc. (FTNT - Free Report) is set to report first-quarter 2017 results on Apr 27. Last quarter, the company posted a remarkable positive earnings surprise of 125%. Notably, Fortinet has outperformed the Zacks Consensus Estimate thrice and missed in one occasion, over the trailing four quarters. It has an average negative earnings surprise of 47.92%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Fortinet’s network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration.
For the last two quarters, there has been a slowdown in Fortinet’s sales. The company observed that organizations have been breaking their cybersecurity investment plans into phases and implementing the same over longer periods of time instead of making a single large investment. Therefore, the aforementioned factor is likely to affect the to-be-reported quarter revenues.
Nonetheless, we opine that Fortinet’s initiative to change its business model to subscription-based service provider will continue to drive the company’s bottom-line results. Subscription-based service is a high gross margin business (approximately 80%) compared with the hardware-centric model.
Notably, the company generates over 50% of the total revenue from these services, which helped it generate a 250 basis points gross margin expansion in fourth-quarter 2016. We believe that the strategy will continue to improve the company’s bottom-line performances.
Fortinet, Inc. Price and EPS Surprise
Fortinet, Inc. Price and EPS Surprise | Fortinet, Inc. Quote
Earnings Whispers
Our proven model does not conclusively show that Fortinet 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: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 2 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Fortinet carries 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 and 5 (Sell rated) 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:
Identiv Inc. (INVE - Free Report) , with an Earnings ESP of +6.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +3.77%, and a Zacks Rank #2.
Fiserv Inc. , with an Earnings ESP of +0.85% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>