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Palo Alto (PANW) to Post Q4 Earnings: A Beat in the Cards?

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We expect Palo Alto Networks Inc. (PANW - Free Report) to beat expectations when it reports fourth-quarter 2017 results on Aug 31, 2017.

Why a Likely Positive Surprise?

Our proven model shows that Palo Alto is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Palo Alto’s Earnings ESP is +0.07%. This is because the company’s Most Accurate estimate is 80 cents while the Zacks Consensus Estimate is pegged lower at 79 cents. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Palo Alto currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 has a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Palo Alto’s Zacks Rank #3 and +0.07% ESP makes us reasonably optimistic of an earnings beat.

Palo Alto Networks, Inc. Price and EPS Surprise

What is Driving Better-than-Expected Earnings?

Palo Alto allows firms, service providers and government bodies to impose stringent security measures through its network security platform.

The company is gaining customer accounts and increasing penetration of existing customers, consequently driving revenue growth. During the third quarter, the company added over 2,000 customers, bringing the total to approximately 39,500 worldwide, which includes over 86 of the Fortune 100 and more than 60% of the Global 2,000.

It is to be noted that in each of the last 21 quarters, Palo Alto has added at least 1,000 customers. The vast customer base presents the company an opportunity to upsell products within its installed user base. Any product revamp brings in additional dollars as enterprises attempt to keep threat-management infrastructure updated. These factors, in turn, support the top line.

Revenue growth seems to be steady, aided by strength across all its geographical regions and business segments. Customer wins along with expansion of the company’s existing customer base are other positives. We believe that its product refreshes and acquisition synergies will boost revenues, going forward.

Notably, Palo Alto has strong record of earnings surprises in the trailing four quarters, with an average surprise of 4.07%.

Other Stocks to Consider

Here are some other companies you may consider as our proven model shows these too have the right combination of elements to post an earnings beat this quarter:

Micron Technology, Inc. (MU - Free Report) , with an Earnings ESP of +0.62%, boasts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Oxford Industries, Inc. (OXM - Free Report) , with an Earnings ESP of +1.41%, carries a Zacks Rank #2.

Adobe Systems Incorporated (ADBE - Free Report) , carries a Zacks Rank #3 and has an Earnings ESP of +0.54%.

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