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Axon Enterprise (AAXN) Q3 Earnings: Is a Beat in Store?

Zacks Equity Research

Axon Enterprise, Inc. AAXN will release third-quarter 2017 results on Nov 7, after the market closes.

Last quarter, the company reported in-line earnings. In the trailing four quarters, the company recorded an average positive surprise of 45.61%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Axon Enterprise is likely to beat earnings estimates this quarter. Notably, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Axon Enterprise possesses both of these attributes, as mentioned below:

Zacks ESP: Axon Enterprise has an Earnings ESP of +12.50%. This is because the Most Accurate estimate is pegged at 6 cents, higher than the Zacks Consensus Estimate of 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Axon Enterprise currently carries a Zacks Rank #2, which along with a positive earnings ESP hints at possible surprise prediction. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

Axon Enterprise continues to witness strong quarterly demand for its body-worn video cameras. In line with its trend, in the third quarter also, the company won a number of orders for its smart weapons from various police departments. Some of its notable buyers in the to-be-reported quarter include Albuquerque Police Department, California Highway Patrol as well as more than a dozen of State Police Departments. Such order growth is expected to boost the company’s quarterly sales.

To that end, during the second-quarter earnings call, the company said that it expects to record 55% higher revenues year over year in the third quarter. In line with this, the Zacks Consensus Estimate for the company’s third-quarter revenues is pegged at $82.1 million, reflecting 14.2% annual improvement.

On the other hand, operating expenses are projected to grow 4-6% sequentially, as the company continues to add customer facing roles, invest in R&D initiatives as well as expand into new international markets. Whereas, a sequential margin improvement is expected as the company projects to incur fewer nonrecurring camera hardware costs, improve hardware pricing, increase Weapons revenue and add users to the Axon platform.

Per the FBI’s National Instant Criminal Background Check System (NICS), third-quarter 2017’s firearm background checks dropped 6.8% from the year-ago quarter’s figure, thus indicating a decline in demand for firearms in the soon-to-be reported quarter. This could in turn hurt sales growth for publicly traded gun manufacturers like Axon Enterprise.

In the third quarter, the Zacks Consensus Estimate for earnings is expected to reflect a 23.8% year-over-year plunge.

Axon Enterprise, Inc. Price and EPS Surprise


Axon Enterprise, Inc. Price and EPS Surprise | Axon Enterprise, Inc. Quote


Recent Peer Releases

Allegion plc’s ALLE third-quarter 2017 adjusted earnings came in at $1.02 per share, in line with the Zacks Consensus Estimate. Adjusted earnings were up 9.7% from the prior-year quarter.

Fortune Brands Home & Security, Inc. FBHS reported better-than-expected bottom-line results for third-quarter 2017, beating estimates by 1.2%. Earnings, excluding the impact of charges/gains, were 83 cents per share, above the Zacks Consensus Estimate of 82 cents. Also, the figure grew 3.8% from the year-ago quarter’s tally of 80 cents.

Ball Corporation BLL reported third-quarter 2017 adjusted earnings of 52 cents per share, missing the Zacks Consensus Estimate of 59 cents. Earnings, however, were up 8.3% year over year.

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