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Zscaler (ZS) to Report Q3 Earnings: What's in the Cards?

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Zscaler, Inc. (ZS - Free Report) is set to report third-quarter fiscal 2019 results on May 30.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 318.8%.

In second-quarter fiscal 2019, the company reported adjusted earnings of 9 cents per share against loss of 3 cents in the year-ago period and the Zacks Consensus Estimate of a loss of 1 cent.

Revenues of $74.3 million increased 65% from the year-ago period and came above the Zacks Consensus Estimate of $66 million.

Zscaler, Inc. Price and EPS Surprise


Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote

For the fiscal third quarter, the Zacks Consensus Estimate for earnings has remained steady at 1 cent over the past seven days. This indicates an increase of 150% from the year-ago period. Management anticipates adjusted earnings of 1 cent per share.

The Zacks Consensus Estimate for revenues is pegged at $74.5 million, indicating an increase of 51.6% from the year-ago period reported figure. Management anticipates revenues to be in the range of $74 to $75 million.

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

Key Factors at Play in Q3

Zscaler’s strategy to continuously upgrade its cloud platform strengthens the company’s competitive position and boosts its user base. This is likely to aid third-quarter fiscal 2019 results.

Additionally, the company’s ability to provide cloud-based security solutions irrespective of the users’ “device or location” may continue to be one of the key drivers to win customers in the to-be-reported quarter.

Moreover, Zscaler cloud’s capability to effectively handle web traffic and block any unnecessary interference on Microsoft's (MSFT - Free Report) Office 365 may be a factor driving its user base in third-quarter fiscal 2019.

Notably, the company’s ability to upscale security, especially when there is increased web traffic on Office 365, helped it win a customer in second-quarter fiscal 2019.

Zscaler is also helping enterprises mitigate a number of encrypted SSL-based threats by deploying “man-in-the-middle SSL inspection at scale.” Moreover, the company’s cloud-based solutions provide protection against the growing number of encrypted threats. The above factors may help Zscaler improve its top line in third-quarter fiscal 2019.

However, the company expects billings to decline in the third quarter of fiscal 2019.

What Our Model Says

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 (Sell) or 5 (Strong Sell) are best avoided.

Zscaler 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.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post earnings beat in their upcoming releases:

Verint Systems Inc. (VRNT - Free Report) has an Earnings ESP of +2.75% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Science Applications International Corporation (SAIC - Free Report) has an Earnings ESP of +7.76% and a Zacks Rank #1.

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