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Dropbox (DBX) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Dropbox Inc. DBX is expected to release first-quarter fiscal 2019 results on May 9.

Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 72.9%.

Past-Quarter Performance

In the last reported quarter, the company reported non-GAAP earnings of 10 cents surpassing the Zacks Consensus Estimate of 8 cents per share. Revenues were $376 million outpacing the Zacks Consensus Estimate of $370 million. The top line also increased 23% on a year over year basis, primarily on the back of higher user growth and ARPU expansion.

Dropbox, Inc. Price, Consensus and EPS Surprise

Dropbox, Inc. Price, Consensus and EPS Surprise | Dropbox, Inc. Quote

How are Estimates Faring?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 6 cents, unchanged for the last 30 days. This reflects a decline of about 25% from year-ago earnings. For quarterly sales, the consensus mark stands at $381.4 million, suggesting an improvement from 20.6% from the year-ago reported figure.

Dropbox expects revenues for 2019 to be in the range of $1.627 billion to $1.642 billion. The Zacks Consensus Estimate for revenues is pegged at $1.64 billion, suggesting growth of 17.6% from the year-ago figure.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Dropbox’s continuous efforts to strengthen cloud-based and AI technologies are likely to drive the top line in the to-be reported quarter. The company’s focus on helping users access and synchronize files as well as use applications through multiple devices is enhancing user experience which in turn is likely to aid the first-quarter results.

Moreover, the company’s integration of Dropbox Extensionsand various partnership programs is making it easier for people and organizations to work with files on the go. Further, strong focus on product innovation and introducing new products is anticipated to provide the company a competitive edge against its peers, which in turn will impact the top line in the to-be-reported quarter.

Recently, Dropbox completed the acquisition of HelloSign. Together, Dropbox and HelloSign will provide enhanced experience to Dropbox users, and simplify workflows for millions of customers. Dropbox has also announced various partnership programs of late. The company recently entered into a partnership with Microsoft, Google, Salesforce, Adobe, and Zoom. The alliance is making it easier for people and organizations to work with files on the go. Dropbox’s acquisition synergies and strong expansion will favor first-quarter results.

These aforesaid factors are helping Dropbox to win new customers. However, increasing investments on product enhancements and other growth strategies are likely to limit margin expansion at least in the near term.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Dropbox carries a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are a few stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Fujifilm Holdings Corp. FUJIY has an Earnings ESP of +20.55% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synopsys, Inc. SNPS has an Earnings ESP of +1.15% and a Zacks Rank #1.

Agilent Technologies, Inc. A has an Earnings ESP of +2.10% and a Zacks Rank #2.

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