Is a Beat Likely for F5 Networks (FFIV) This Earnings Season?
F5 Networks FFIV is likely to beat expectations when it reports third-quarter fiscal 2022 results after market close on Jul 25. In the last reported quarter, the company delivered an earnings surprise of 6%.
The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 7.5%.
For the fiscal third quarter, F5 Networks estimates revenues in the range of $660-$680 million ($670 million at the midpoint). The Zacks Consensus Estimate for revenues is pegged at $667.4 million, suggesting a year-over-year increase of 2.4%.
The company anticipates non-GAAP earnings in the range of $2.18-$2.30 per share ($2.24 at the midpoint). The Zacks Consensus Estimate stands at $2.23 per share, indicating a year-over-year decrease of approximately 19.2%.
Let’s see how things have shaped up before the upcoming announcement.
F5, Inc. Price and Consensus
F5, Inc. price-consensus-chart | F5, Inc. Quote
Factors to Note Ahead of Q3 Results
F5 Networks’ fiscal third-quarter performance is likely to have benefited from the hybrid work environment and the ongoing digital transformation wave, which is boosting the demand for secured communication networks.
F5 Network’s sustained focus on transitioning the business to a software-driven model is anticipated to have aided the company’s overall performance in the fiscal third quarter. The surging demand for multi-cloud application services is expected to have been a key growth driver during the quarter.
Moreover, the rising traction of the Enterprise License Agreement and annual subscriptions by customers are likely to have boosted software growth. F5 Networks expects revenues from the Software segment to increase in the 35%-40% range in full-fiscal 2022.
Additionally, FFIV and NGINX’s (pronounced as engine x) first combined solution — Controller 3.0 — is expected to have boosted the total addressable market and deal sizes across the DevOps and Super-NetOps customer profiles. This is estimated to have positively impacted the company’s overall performance during the fiscal third quarter.
However, the ongoing industry-wide supply-chain constraints for components are likely to have negatively impacted F5 Networks’ systems sales during the third quarter. The company forecasts that the recent supply-chain constraints will lead to a significant shortfall in its ability to deliver products in the third quarter.
This, in turn, is anticipated to have partially offset the benefits of the growth projection for the software business, thereby leading to much slower growth in overall Product segment revenues. The Zacks Consensus Estimate for Product revenues stands at $324 million, indicating an increase of 4.5% from the year-ago reported figure of $310 million.
Earnings Whispers
Our proven model predicts an earnings beat for F5 Networks this time. 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, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($2.26 per share) and the Zacks Consensus Estimate ($2.23 per share), is +1.16%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: FFIV carries a Zacks Rank #3.
Other Stocks With the Favorable Combination
Per our model, Valero Energy VLO, Merck & Co. MRK and Apple AAPL also have the right combination of elements to post an earnings beat in their upcoming releases.
Valero sports a Zacks Rank #1 and has an Earnings ESP of +10.22%. The company is scheduled to report second-quarter 2022 results on Jul 28. Valero’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 84.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VLO’s second-quarter earnings is pegged at $8.78 per share, indicating a sharp improvement from the year-ago quarter’s earnings of 48 cents per share. The consensus mark for revenues stands at $39.7 billion, suggesting a year-over-year increase of 42.9%.
Merck currently sports a Zacks Rank #1 and has an Earnings ESP of +7.18%. The company is slated to report its second-quarter 2022 results on Jul 28. Merck’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same on one occasion, the average surprise being 13.4%.
The Zacks Consensus Estimate for Merck’s second-quarter earnings stands at $1.77 per share, implying a year-over-year increase of 35.1%. MRK is estimated to report revenues of $13.9 billion, which suggests growth of 21.5% from the year-ago quarter.
Apple is slated to report third-quarter fiscal 2022 results on Jul 28. The company carries a Zacks Rank #3 and has an Earnings ESP of +0.88% at present. Apple’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while meeting the same on one occasion, the average surprise being 11.9%.
The Zacks Consensus Estimate for quarterly earnings is pegged at $1.13 per share, suggesting a year-over-year decline of 13.1%. AAPL’s quarterly revenues are estimated to increase 0.5% year over year to $81.9 billion.
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