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Factors Setting the Tone for VMware's (VMW) Q4 Earnings

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VMware is set to release fourth-quarter fiscal 2019 results on Feb 28.

In the last reported quarter, VMware’s non-GAAP earnings of $1.56 per share beat the Zacks Consensus Estimate by 6 cents and increased 26.8% from the year-ago quarter.

Revenues of $2.20 billion also surpassed the consensus mark of $2.17 billion and improved 13.5% on a year-over-year basis.

For fourth-quarter fiscal 2019, revenues are anticipated to be $2.5 billion, up 12.3% year over year. Non-GAAP earnings are anticipated to be $1.87 per share.

The Zacks Consensus Estimate for revenues and earnings currently stand at $2.50 billion and $1.87, reflecting year-over-year growth of 8.3% and 11.3%, respectively.

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

Factors to Watch

VMware is benefiting from continued enterprise deal wins that are expected to drive growth in the to-be-reported quarter. The company continues to witness robust growth in the virtualization market, driven by portfolio strength.

Moreover, the company’s dominance in software-defined data center (SDDC) along with expanding customer base in cloud, driven by partnerships with the likes of International Business Machines (IBM - Free Report) , Amazon Web Services (AWS) and Alibaba (BABA - Free Report) , is a positive.

Apart from the new Amazon Relational Database Service (RDS) on VMware, the company announced two new offerings for AWS Outposts. It also announced VMware Cloud Foundation for EC2 that provides AWS native Outposts customers a software-defined data center experience, supported by NSX, vRealize Automation and Network Insights, and AppDefense.

The IBM expansion includes a new IBM Service offering to help migrate and extend mission-critical VMware workloads to the IBM Cloud. It also encompasses new integrations to help enterprises modernize applications with Kubernetes and containers.

VMware’s NSX solution has also gained significant adoption. Further, strong End-User Computing (EUC) license bookings, driven by Workspace ONE, are a key catalyst. Notably, eight out of the top 10 enterprise agreements included EUC in the last reported quarter.

Moreover, VMware exited third-quarter with $144 million of license backlog, which is $3 million higher on a sequential basis.

Notably, VMware paid its previously announced special dividend worth $11 billion to shareholders late last quarter.

What Our Model Says

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

VMware has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

A Stock With Favorable Combination

Here is a stock you may want to consider as our model shows that it has the right combination of elements to post an earnings beat.

Momo Inc. (MOMO - Free Report) has an Earnings ESP of +1.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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