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F5 Networks (FFIV) to Post Q1 Earnings: What's in Store?

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F5 Networks (FFIV - Free Report) is set to report first-quarter fiscal 2020 results on Jan 27.

For first-quarter fiscal 2020, F5 Networks expects revenues of $560-$570 million (mid-point $565 million). The Zacks Consensus Estimate for revenues is pegged at $566.1 million, implying growth of 4.1% from the figure reported in the year-ago quarter.

The company anticipates non-GAAP earnings of $2.41-$2.44 per share. The Zacks Consensus Estimate is pegged at $2.43 per share, unchanged over the past 30 days but indicates decline of 10% from the figure reported in the year-ago quarter.

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. Price and EPS Surprise

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

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 1.7%.

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

Factors at Play

F5 Networks’ first-quarter fiscal 2020 results are likely to have benefited from a focus on transitioning the business to a software-driven model. Increasing demand for multi-cloud application services is expected to have been a key driver.

Rising traction of the Enterprise License Agreement (ELA) and annual subscriptions by customers are likely to have boosted software growth. This, in turn, is expected to have been a tailwind to product revenues. The Zacks Consensus Estimate for product revenues stands at $241 million, indicating 3% growth from the figure reported in the year-ago quarter.

Moreover, the top line is expected to have benefited from significant contributions from NGINX, which was acquired by F5 Networks in the third quarter of fiscal 2019.

However, the company’s continued hardware-to-software transition is likely to get reflected in its impending results. A slowdown in the company’s highly profitable traditional systems business is assumed to have kept the margin slightly stressed as well.

F5 Networks also expects operating margins to contract in the fiscal first quarter, based on seasonal patterns.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for F5 Networks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although F5 Networks has an Earnings ESP of +0.14%, it carries a Zacks Rank #4 (Sell).

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:

Apple Inc. (AAPL - Free Report) has an Earnings ESP of +4.08% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Palo Alto Networks (PANW - Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #3.

Check Point Software Technologies (CHKP - Free Report) has an Earnings ESP of +0.90% and a Zacks Rank of 3.

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