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Virtusa (VRTU) to Report Q4 Earnings: What's in the Cards?

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Virtusa Corporation (VRTU - Free Report) is set to report fourth-quarter fiscal 2020 results on May 13.

On Mar 26, the company lowered its fiscal fourth-quarter revenue outlook and withdrew the earnings guidance, citing adverse impact of the coronavirus outbreak.

Management now anticipates to report revenues at least $27 million below the mid-point of its previously-guided range of $353.4-$361.4 million. The Zacks Consensus Estimate is pegged at $330 million, indicating a 0.7% year-over-year improvement.

Furthermore, the company had previously projected to generate earnings per share between 90 cents and 96 cents. The consensus mark for earnings stands at 59 cents per share, suggesting a 28.3% decline from the year-ago period’s reported number.

 

In the trailing four quarters, the company’s earnings beat estimates on three occasions and missed in the other, reporting an average negative surprise of 4.7%.

Let’s see how things have shaped up for the upcoming announcement.

Factors at Play

As per the company’s Mar 26 outlook update, Virtusa’s business was significantly disrupted in the March-end quarter due to the coronavirus-related business disruptions and project delays. Furthermore, elongated client decision-making cycles hurt quarterly revenues.

Moreover, a reduced client demand, primarily in the travel and manufacturing industries hit by the coronavirus-led lockdown, is expected to have thwarted top-line growth in the soon-to-be-reported quarter.

Nonetheless, Virtusa’s efforts to reinforce its digital-transformation capabilities for expanding and solidifying the company’s position in the highly competitive environment have been a steady tailwind.

In addition, solid demand for cloud, IoT, security, and data-analytics solutions and services is likely to have benefited the company’s quarterly revenues. Also, higher investments by clients in digital transformation, artificial intelligence and automation are anticipated to have been conducive to its performance.

What Our Model Says

Our proven model does not predict an earnings beat for Virtusa this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. 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.

Virtusa currently carries a Zacks Rank of 4 and has an Earnings ESP of -5.01%.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +0.15% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Datadog Inc. (DDOG - Free Report) has an Earnings ESP of +100.00% and holds a Zacks Rank of 3 currently.

Cisco Systems Inc. (CSCO - Free Report) has an Earnings ESP of +6.29% and carries a Zacks Rank #3.

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