F5 (FFIV) to Report Q4 Earnings: Key Factors to Consider
F5, Inc. FFIV is scheduled to report fourth-quarter fiscal 2023 results on Oct 24.
For the fiscal fourth quarter, F5 estimates revenues in the range of $690-$710 million ($700 million at the midpoint). The Zacks Consensus Estimate for revenues is pegged at $701.6 million, suggesting a marginal improvement from the year-ago quarter’s sales of $700 million.
The company anticipates non-GAAP earnings in the range of $3.15-$3.27 per share ($3.21 at the midpoint). The Zacks Consensus Estimate stands at $3.22 per share, indicating a year-over-year increase of approximately 22.9%. Earnings estimates for the quarter have remained unchanged over the past 60 days.
F5’s earnings surpassed estimates in all the trailing four quarters, the average beat being 6.4%.
Let’s see how things are shaping up for this earnings announcement.
F5, Inc. Price and EPS Surprise
F5, Inc. price-eps-surprise | F5, Inc. Quote
Factors to Note
The persistent macro uncertainty and its impact on customer spending are likely to have negatively impacted F5’s fourth-quarter top line, particularly the Product segment, which comprises Software and Systems sub-divisions. Our estimate of $324.4 million for the Product segment’s revenues indicates a year-over-year decline of 7.3%.
The decline in the Product division’s fourth-quarter revenues is likely to be majorly due to the soft demand for its Systems products. Our estimate of $152.6 million for Systems’ revenues indicates a 14.4% year-over-year decrease.
However, the F5 Product segment’s fourth-quarter performance is likely to have benefited from the improving demand for its software solutions, which had been hurt by tightened IT spending amid persistent macroeconomic uncertainties for the past few quarters.
In the third quarter, though the company’s Software segment revenues declined 2.8% year over year to $174 million, it grew 32% sequentially. In the second quarter of fiscal 2023, the division’s revenues fell 13% year over year and 21.3% sequentially to $131.9 million due to customers’ tight budgets amid macroeconomic uncertainties. Third-quarter Software sales were also higher than the first-quarter level of $167.5 million.
Our estimate for Software’s fourth-quarter revenues is currently pegged at $171.7 million. Strong growth in renewals, stabilization in new-term subscriptions and interim expansions are likely to have aided Subscription Software’s revenue growth.
The acceleration in BIG-IP and NGINX subscription software deals is expected to have remained a major growth driver during the to-be-reported quarter. BIG-IP’s data point performance, automation capabilities and the lower cost of ownership are likely to have helped F5 win multiple deals in the fourth quarter. Moreover, FFIV is anticipated to have witnessed strong demand for its NGINX subscription as large enterprises continue to adopt the solution for their cloud and Kubernetes workloads.
Furthermore, high-maintenance renewals and a positive impact of the price increase introduced in the fourth quarter fiscal of 2022 are expected to have boosted F5’s Services segment revenues in the fourth quarter. Our estimate for the Services division’s fourth-quarter revenues is pegged at $376.5 million, suggesting an expected 7.6% increase from the year-ago quarter’s $350.1 million.
Additionally, the company’s cost-saving initiatives, which include headcount reduction, eliminating portions of its facilities footprint and travel reduction, are likely to have boosted the bottom line in the to-be-reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for F5 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. However, that’s not the case here.
F5 currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Palantir Technologies PLTR, Intel INTC and ON Semiconductor ON have the right combination of elements to post an earnings beat in their upcoming releases.
Palantir carries a Zacks Rank #2 and has an Earnings ESP of +4.35%. The company is scheduled to report third-quarter 2023 results on Nov 2. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, with the average surprise being 2.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Palantir’s third-quarter earnings stands at 6 cents per share, indicating a year-over-year improvement of 500%. It is estimated to report revenues of $555 million, which suggests an increase of approximately 16.1% from the year-ago quarter.
Intel is slated to report third-quarter 2023 results on Oct 26. The company has a Zacks Rank #2 and an Earnings ESP of +12.98% at present. Intel’s earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing on one occasion, the average surprise being 130.9%.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 21 cents per share, suggesting a decrease of 64.4% from the year-ago quarter’s earnings of 59 cents. Intel’s quarterly revenues are estimated to decline 12.1% year over year to $13.48 billion.
ON carries a Zacks Rank #2 and has an Earnings ESP of +1.00%. The company is scheduled to report third-quarter 2022 results on Oct 30. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.7%.
The Zacks Consensus Estimate for ON’s third-quarter earnings is pegged at $1.35 per share, indicating a year-over-year decrease of 6.9%. The consensus mark for revenues stands at $2.15 billion, suggesting a year-over-year decline of 2.1%.
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