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Will Demand Volatility Dent Arista's (ANET) Q1 Earnings?
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Arista Networks, Inc. (ANET - Free Report) is scheduled to report first-quarter 2020 results after the closing bell on May 5. In the last reported quarter, the company delivered a positive earnings surprise of 9.6%, surpassing the Zacks Consensus Estimate by 20 cents. In the first quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis, due to volatility in demand amid the coronavirus pandemic.
Factors at Play
During the first quarter, Arista closed the acquisition of Big Switch Networks, which is likely to offer key engineering expertise in the network packet market and increased software multi-cloud visibility. This, in turn, is likely to help the company focus more on the software-driven networking market and complement its data analyzer platforms.
The volatility in the cloud business is likely to have continued in the quarter due to an overall muted demand picture. Although enterprise and financial verticals are expected to have witnessed healthy growth, these are unlikely to fully offset the expected revenue decline from cloud, service provider and specialty cloud businesses. Consequently, overall revenues are likely to trend lower.
Moreover, management expected to witness no direct impact from the virus outbreak owing to prudent financial management and portfolio strength. However, supply-chain mechanisms are likely to have weighed on the overall quarterly performance.
For first-quarter 2020, the company projects revenues of $522-$532 million, which is about 4.6% lower at the midpoint from the previous quarter’s reported figure. The Zacks Consensus Estimate for the same is pegged at $513 million, indicating a 13.8% decline from the year-ago quarter’s reported number. The consensus mark for earnings is currently pegged at $1.79 per share. It reported earnings of $2.31 per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for Arista 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 an earnings beat. This is perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.39%, with the former being pegged at $1.82 and the latter at $1.79. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Earnings ESP for Motorola Solutions, Inc. (MSI - Free Report) is +3.34% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on May 7.
The Earnings ESP for CenturyLink, Inc. is +1.41% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 6.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Will Demand Volatility Dent Arista's (ANET) Q1 Earnings?
Arista Networks, Inc. (ANET - Free Report) is scheduled to report first-quarter 2020 results after the closing bell on May 5. In the last reported quarter, the company delivered a positive earnings surprise of 9.6%, surpassing the Zacks Consensus Estimate by 20 cents. In the first quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis, due to volatility in demand amid the coronavirus pandemic.
Factors at Play
During the first quarter, Arista closed the acquisition of Big Switch Networks, which is likely to offer key engineering expertise in the network packet market and increased software multi-cloud visibility. This, in turn, is likely to help the company focus more on the software-driven networking market and complement its data analyzer platforms.
The volatility in the cloud business is likely to have continued in the quarter due to an overall muted demand picture. Although enterprise and financial verticals are expected to have witnessed healthy growth, these are unlikely to fully offset the expected revenue decline from cloud, service provider and specialty cloud businesses. Consequently, overall revenues are likely to trend lower.
Moreover, management expected to witness no direct impact from the virus outbreak owing to prudent financial management and portfolio strength. However, supply-chain mechanisms are likely to have weighed on the overall quarterly performance.
For first-quarter 2020, the company projects revenues of $522-$532 million, which is about 4.6% lower at the midpoint from the previous quarter’s reported figure. The Zacks Consensus Estimate for the same is pegged at $513 million, indicating a 13.8% decline from the year-ago quarter’s reported number. The consensus mark for earnings is currently pegged at $1.79 per share. It reported earnings of $2.31 per share in the year-earlier quarter.
Earnings Whispers
Our proven model predicts an earnings beat for Arista 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 an earnings beat. This is perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.39%, with the former being pegged at $1.82 and the latter at $1.79. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote
Zacks Rank: Arista currently has a Zacks Rank #3.
Other Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Telephone and Data Systems, Inc. (TDS - Free Report) is set to release quarterly numbers on Apr 30. It has an Earnings ESP of +5.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Motorola Solutions, Inc. (MSI - Free Report) is +3.34% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on May 7.
The Earnings ESP for CenturyLink, Inc. is +1.41% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 6.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>