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Is a Beat in Store for Citrix Systems (CTXS) in Q3 Earnings?

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Citrix Systems Inc. (CTXS - Free Report) is scheduled to report third-quarter 2018 results on Oct 24.

The company has witnessed a remarkable streak of beating earnings estimates. In fact, in each of the trailing four quarters, Citrix surpassed the Zacks Consensus Estimate, with an average positive earnings surprise of 12.7%.

In second-quarter 2018, Citrix delivered adjusted earnings of $1.28 per share, outpacing the Zacks Consensus Estimate by 8 cents. The figure surged 24.3% on a year-over-year basis.

Moreover, revenues increased 7.1% from the year-ago quarter to $742.4 million and comfortably surpassed the Zacks Consensus Estimate of $717 million.

For third-quarter 2018, Citrix anticipates non-GAAP earnings between $1.23 and $1.26 per share. We note that the Zacks Consensus Estimate has remained unchanged over the past 30 days. In fact, the Zacks Consensus Estimate for earnings is pegged $1.25 per share, representing growth of 2.5% year over year.

The company expects revenues in the range of $715-$725 million. The analysts polled by Zacks project revenues of roughly $723.1 million, near higher-end of management’s guidance, up approximately 4.7% from the year-ago quarter.

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

Favourable ESP

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Citrix has a Zacks Rank #3 and an Earnings ESP of +0.48% which raises confidence about a possible earnings surprise.

Factors Driving Q3 Results

Citrix continues to focus on enhancing its subscription based solutions with new capabilities. In the second quarter, Subscription revenues surged 49% from the year-ago to $110.8 million. Management stated that 50% of new product bookings in Workspace services were subscription based.

Workspace services revenues in the previous quarter, increased 7% year over year to $455 million. The Zacks Consensus Estimate for Workspace Services and Desktop Solutions revenues in third quarter is pegged at $448 million, compared with the year-ago figure of $432 million.

Citrix’s recent efforts to expand product portfolio are impressive. In collaboration with ServiceNow (NOW - Free Report) , the company introduced Citrix IT Service Management Connector, or Citrix ITSM Connector. ServiceNow ITSM customers can benefit from enhanced experience as the new solution accelerates desktop and application provisioning processes.

Notably, ServiceNow has certified Citrix’s new solution, which can be availed from ServiceNow Store. The adoption of new solution is likely to generate incremental revenues for the third quarter.

The Zacks Consensus Estimate for Networking revenues, which grew 5% year-over-year to $207 million in the second quarter, is pegged at $194 million for the third quarter.

We believe the synergies from Cedexis buyout, strategic alliances and focus on adding innovative features to its subscription offerings are likely to act as tailwinds for third-quarter results.

Other Stocks to Consider

Here are a couple of stocks, which, as per our model, also have the right combination of elements to post an earnings beat this quarter:

Callaway Golf Company (ELY - Free Report) has an Earnings ESP of +71.42% and a Zacks Rank #1. The company is slated to report third quarter earnings on Oct 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bristol-Myers Squibb Company (BMY - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #2. The company is slated to report third quarter earnings on Oct 25.

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