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Earnings Preview: Citrix Systems

Zacks Equity Research

Citrix Systems Inc. (CTXS) is scheduled to release its first quarter 2012 results on Wednesday, April 25, after the closing bell. The current Zacks Consensus Estimate for the first quarter is pegged at 39 cents, representing an annualized decline of 6.00%.

With respect to earnings surprises over the trailing four quarters, Citrix Systems has outperformed the Zacks Consensus Estimate in all the four quarters with an average earnings surprise of positive 9.57%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the same period.

Fourth Quarter Recap

On January 25, 2012, Citrix Systems reported its fourth quarter 2011 financial results. GAAP net income was $108.7 million or 58 cents per share compared with a net income of $94.4 million or 49 cents per share in the prior-year quarter. Quarterly adjusted EPS of 66 cents surpassed the Zacks Consensus Estimate by a penny.

Quarterly net revenue was $619.4 million, up 17% year over year and was in line with the Zacks Consensus Estimate of $619 million. Gross margin in the fourth quarter of 2011 was 87.2% compared with 88% in the year-ago quarter while quarterly operating margin was 21.9% compared with 21.4% in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the 13 analysts covering the stock, none increased or decreased the EPS estimate for the first and second quarter of 2012. Similarly, for fiscal 2012 and 2013, none of the 13 analysts revised the estimate over the last 30 days.

Magnitude of Estimate Revisions

During the last 30 days, for both the first and the second quarter of 2012, the current Zacks Consensus Estimate was in line with the previous EPS estimates of 39 cents and 50 cents, respectively.

Likewise, for fiscal 2012, the current Zacks Consensus Estimate was just a penny below the previous estimate of $2.24. However, for fiscal 2013, the current Zacks Consensus Estimate was in line with the earlier estimate of $2.63.

Earning Surprises

In the previous quarter, Citrix Systems reported EPS of 66 cents, which beat the Zacks Consensus Estimate by a penny. The current Zacks Consensus Estimates for the ongoing and the upcoming quarter contains a 0.00% upside potential (essentially a proxy for future earning surprises). However, fiscal 2012 and 2013 reflect downside potentials of 1.35% and 0.38%, respectively.

Our Recommendation

Strong financial outlook along with moderate economic recovery and increasing trend for globalization will drive growth, in our view. However, sluggish economic growth coupled with stiff competition from Vmware, Inc. (VMW) will act as a headwind for the company, going forward.

Currently, Citrix Systems has a Zacks #4 Rank, implying a short-term Sell rating on the stock.

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