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F5 Networks (FFIV) to Report Q3 Earnings: What's in Store?

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F5 Networks Inc. (FFIV - Free Report) is set to report third-quarter fiscal 2019 results on Jul 24.

The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 4.97%.

In the last reported quarter, the company delivered earnings per share of $2.57, which topped the Zacks Consensus Estimate of $2.55 and also improved 11.3% year over year.

Moreover, F5 Networks revenues inched up 2.2% year over year to $544.9 million but missed the Zacks Consensus Estimate of $547 million.

Guidance and Estimates for Q3

For the fiscal third quarter, F5 Networks expects revenues in the range of $550-$560 million. The Zacks Consensus Estimate for the same stands at $555.6 million, indicating growth of 2.5% from the year-ago reported figure.

Moreover, the company anticipates non-GAAP earnings per share in the band of $2.54-$2.57. The consensus estimate of $2.57 for the metric has been stable ahead of the company’s earnings release.

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. price-eps-surprise | F5 Networks, Inc. Quote

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

Factors at Play

F5 Networks’ third-quarter fiscal results are likely to benefit from solid software growth, backed by a solid uptick in public cloud and security offerings. Strong momentum in the security market is expected to drive adoption of its security solutions in the soon-to-be-reported quarter.

Notably, the company’s anti-bot and machine-generated traffic monitoring and blocking capabilities are gaining traction from customer uptake, which is likely to remain a tailwind in the quarter to be reported. Emergence of the new security use cases including privileged user access, credential stuffing and zero trust is also a key catalyst.

Moreover, acceleration in Enterprise License Agreement (ELA) and Virtual Edition (VE) subscription software deals is expected to boost the upcoming quarterly results.

However, the company’s hardware-to-software transition is likely to persist as an overhang on its results. Slowdown in the company’s traditional systems business due to elongation in deal timings also remains a major concern.

Although a recovery of service provider sales in the last reported quarter were a positive,, management is still apprehensive about its near-term prospects on account of the timing of 5G network deployment. Consequently, the

We also note that the acquisition of Nginx, which closed in the June quarter, will not have any immediate impact on the company’s revenue stream.

Further, higher spending on cloud and security — the company’s largest growth areas in business — is assumed to keep the margin slightly stressed.

What Our Model Says

The proven Zacks model shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

F5 Networks currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% in the combination makes surprise prediction difficult.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

United States Cellular Corporation (USM - Free Report) has an Earnings ESP of +15.66% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CGI Group, Inc. (GIB - Free Report) has an Earnings ESP of +1.27% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. (TMO - Free Report) has an Earnings ESP of +0.54% and holds a Zacks Rank #2.

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