Can Violin Memory (VMEM) Surprise this Earnings Season? - Analyst Blog
Violin Memory, Inc. VMEM is slated to report first-quarter fiscal 2016 results on Jun 2. In the last quarter, the company recorded a positive earnings surprise of 7.4%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Violin Memory’s fourth-quarter earnings beat the Zacks Consensus Estimate by 7.4% driven by solid execution. However, revenues were down 6% sequentially and 27% year over year due to certain customer timing issues.
The company exited the fourth quarter with a strong balance sheet. This, combined with technology introductions, increased customers’ confidence in the company which is likely to aid the first-quarter results as well. Thus, Violin Memory’s business is beginning to accelerate with substantial progress being made in the primary storage business. However, increased expenditure on investments and new product introductions could impact gross margins and thereby impact profits.
Management has provided an outlook for the to-be-reported quarter. Revenues are expected in the range of $21–$24 million. Non-GAAP gross margins are expected in the range of 50–53% and operating expenses are projected between $28 million and $29 million.
Earnings Whispers
Our proven model does not conclusively show that Violin is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 25 cents. Hence, the difference is 0.00%.
Zacks Rank: Violin currently carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Ciena Corporation CIEN, with an Earnings ESP of +21.43% and a Zacks Rank #1 (Strong Buy).
Casey's General Stores, Inc CASY, with an Earnings ESP of +14.29% and a Zacks Rank #2 (Buy).
G-III Apparel Group, Ltd. GIII, with an Earnings ESP of +14.29% and a Zacks Rank #2.
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CIENA CORP (CIEN): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis Report
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VIOLIN MEMORY (VMEM): Free Stock Analysis Report
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