Following the first quarter earnings announcement on April 25, none of the analysts covering Citrix Systems Inc. (CTXS) have made any revisions to their estimates. The brokers have retained their estimates based on the belief that all the positive news has already been incorporated within the stock’s valuation.
First Quarter Highlights
On a GAAP basis, quarterly net income was $68.3 million or 36 cents per share, compared with $73.5 million or 39 cents per share in the year-ago quarter. Adjusted EPS of 45 cents was substantially ahead of the Zacks Consensus Estimate of 39 cents.
Quarterly net revenue of $589.5 million was up 20% year over year, and easily surpassed the Zacks Consensus Estimate of $562 million. Operating margin was 13.7% compared with 16.5% in the prior year quarter.
Agreement of Analysts
Of the 13 analysts covering the stock in the last 7 days, none have revised the estimate for the second quarter of 2012. Similarly, for the third quarter of 2012, none of the 15 analysts covering the stock have made any changes to their estimates.
For fiscal 2012, out of the 14 analysts covering the stock in the last 7 days, none have revised their estimates. The trend is similar for fiscal 2013 as well, where none of the 15 analysts covering the stock have revised their estimates.
Currently, the Zacks Consensus Estimate for the second quarter of fiscal 2012 is 47 cents, with a projected negative growth of 3.61%. For the third quarter of fiscal 2012, the Zacks Consensus Estimate of 60 cents indicates an annual gain of 23.27%.
Magnitude of Estimate Revisions
During the last 7 days, the current Zacks Consensus Estimates for the second and third quarter of 2012 has been in line with previous estimates of 47 and 60 cents respectively. Similarly for fiscal 2012 and 2013, the current Zacks Consensus Estimates are in line with previous estimates of $2.30 and $2.72.
The company has outdone the Zacks Consensus estimates in all of the four previous quarters. In the first quarter of 2012, Citrix Systems outpaced the estimate by 6 cents or 15.38%.
The estimate for the ongoing quarter of fiscal 2012 is in line with the Zacks Consensus estimate, while the estimates for the third quarter of 2012 contains an upside potential of 1.67% (essentially a proxy for future earnings surprises). Fiscal 2012 estimates contains an upside potential of 0.44%, while the estimates for fiscal 2013 are in line with the Zacks Consensus Estimate.
We believe that Citrix Systems is benefiting from the growth opportunity in virtualization and cloud computing market as company’s are viewing these as an effective tool to curtail costs. Desktop virtualization market is expected to touch 100 million personal computers by 2013, while the web conferencing market size is likely to touch $4 billion by 2014, acting as a positive catalyst for the company.
However, the ongoing macroeconomic uncertainty may act as a headwind for the company as it restricts several firms from their target IT spending. Additionally, high cost associated with virtualization may restrict the long term prospect of Citrix. Finally, increased competition from VMware Inc (VMW) provides certain downside risks for the company.
Considering these factors, we maintain our long-term Neutral recommendation on Citrix systems. Currently, Citrix Systems has a Zacks #2 Rank, implying a short-term buy rating on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
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