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Palo Alto (PANW) to Report Q2 Earnings: What's in Store?

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Palo Alto Networks PANW is scheduled to release second-quarter fiscal 2020 results on Feb 24.

The company expects revenues in the range of $838-$848 million, which suggests increase of 18-19% on a year-over-year basis. The Zacks Consensus Estimate is pegged at $844 million, which calls for 18.67% rise from the year-ago quarter’s reported figure.

The company anticipates non-GAAP earnings in the band of $1.11-$1.13 per share. The consensus mark for the same is pegged at $1.12, which indicates a year-over-year decline of 25.83%.

The company has trailing four-quarter positive earnings surprise of 8.51%, on average.

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. price-eps-surprise | Palo Alto Networks, Inc. Quote

Factors at Play

Palo Alto’s second-quarter fiscal 2020 earnings are likely to have been driven by strong adoption of its cyber security solutions. Further, it is witnessing significant momentum for deal wins, which are expected to have driven revenues. In December 2019, the company collaborated with Alphabet’s (GOOGL - Free Report) Google Cloud to develop advanced security solutions.

The company is also gaining from the acquisition of Redlock, which forms the basis of the Prisma public cloud; and Demisto, which is basis of Cortex. Prisma and Cortex are likely to have sustained their strong performance during fiscal second quarter, which is a positive for billings.

Moreover, the Prisma Cloud was deemed ‘In Process’ for the Federal Risk and Authorization Management Program (FedRAMP) during the quarter under review. This is likely to have boosted the visibility of the company’s products by government organizations.

However, expenses related to the acquisition of Aporeto, which closed in fiscal second quarter, is likely to have been an overhang on the bottom line in the quarter to be reported.

Moreover, the Sino-U.S. trade war is affecting manufacture of certain products as the components are available only in China. This is likely to have dented fiscal second-quarter performance in spite of the company increasing firewall prices to offset tariff impact.
What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Palo Alto 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.

Palo Alto has an Earnings ESP of 0.00% and a Zacks Rank #3.

Stocks to Consider

Here are a couple of stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season:

Broadcom Inc. AVGO has an Earnings ESP of +1.72% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CrowdStrike Holdings Inc. CRWD has an Earnings ESP of +5.26% and a Zacks Rank of 3.

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