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What to Expect From Smartsheet (SMAR) This Earnings Season

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Smartsheet Inc. (SMAR - Free Report) is set to report first-quarter fiscal 2020 results on Jun 5.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 42.5%.

The company reported fourth-quarter fiscal 2019 non-GAAP loss of 7 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 14 cents and the year-ago quarter’s loss of 8 cents. Revenues surged 58.2% year over year to $52.2 million and surpassed the Zacks Consensus Estimate of $50 million.

Moreover, customers with annualized contract value (ACV) of more than $50,000 jumped 135% year over year to 444 in the same period.

Smartsheet Inc. Price and EPS Surprise

Smartsheet Inc. Price and EPS Surprise

Smartsheet Inc. price-eps-surprise | Smartsheet Inc. Quote

For the fiscal first quarter, the Zacks Consensus Estimate for loss has remained steady at 18 cents per share over the past seven days. The figure indicates a decline of 50% from the year-ago quarter. Management anticipates non-GAAP net loss to be in the range of 18-19 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $54.6 million. The figure indicates an increase of 50.2% from the year-ago quarter. Smartsheet expects revenues between $54 million and $55 million, reflecting year-over-year growth of 49% - 51%.

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

Key Factors at Play in Q1

Smartsheet’s substantial investments in its products and the company’s efforts to enhance the reach of their products to new customers might boost first-quarter fiscal 2020 results.

The company is constantly bringing out new product offerings to boost incremental value for its customers. Additionally, Smartsheet’s efforts to enter new markets and improve existing product capabilities are likely to aid top-line in the to-be-reported quarter.

Moreover, Smartsheet plans to expand its Accelerator portfolio into new solution areas, including construction, corporate governance and marketing. This is likely to increase recurring revenue from existing customers in first-quarter fiscal 2020.

Further, in the to-be-reported quarter the company achieved “Ready Status” for the Federal Risk and Authorization Management Program (FedRAMP).

By achieving the FedRAMP status, which is a most common approach for “security assessment, authorization, and monitoring” of cloud services, Smartsheet may help more government agencies improve their internal workflow. This is likely to help the company attract new customers and expand its existing federal client base in first-quarter fiscal 2020.

However, increase in personnel costs and shift of Smartsheet’s “services from co-location facilities to public cloud” may hurt margins in the to-be-reported quarter. Moreover, management noted that it will continue its investments in products and marketing strategies. This may hurt profitability in first-quarter fiscal 2020.

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.

Smartsheet 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:

American Outdoor Brands Corporation (AOBC - Free Report) has an Earnings ESP of +9.09% and a Zacks Rank #2. 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 +2.82% and a Zacks Rank #3.

Ambarella, Inc. (AMBA - Free Report) has an Earnings ESP of +100% and a Zacks Rank #3.

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