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F5 Networks (FFIV) to Post Q4 Earnings: What's in the Cards?

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F5 Networks (FFIV) to Post Q4 Earnings: What's in the Cards?

F5 Networks (FFIV) fiscal Q4 results are expected to benefit from growth in its software solutions and services, including its recently launched BIG-IP Cloud Edition.

F5 Networks Inc. FFIV is set to report fourth-quarter fiscal 2018 results on Oct 24.

The company’s results surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive earnings surprise of 6.61%.

In the last reported quarter, the company’s non-GAAP earnings per share of $2.24 increased 20.2% year over year and surpassed the Zacks Consensus Estimate of $1.86. Moreover, F5 Networks’ revenues grew 4.7% to $542.2 million and topped the consensus estimate of $540 million.

F5 Networks, Inc. Price, Consensus and EPS Surprise

F5 Networks, Inc. Price, Consensus and EPS Surprise | F5 Networks, Inc. Quote

For fourth-quarter fiscal 2018, F5 Networks expects revenues in the range of $555-$565 million. The Zacks Consensus Estimate stands at $560.55 million. The company expects non-GAAP earnings per share in the range of $2.61-$2.64. The consensus estimate is pegged at $2.63.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play
F5 Networks’ growth in services and software solutions segment is a key driver. The company’s traction in public cloud deployments, given the surge in demand for security in the multi-cloud environment, is a tailwind.

In its last earnings call, management hinted that it expects the fiscal fourth quarter to witness continued strength in product revenues. Continued adoption of flexible consumption models is expected to continue its uptrend, driving the adoption of company’s new cloud offerings, including the BIG-IP Cloud Edition launched recently.

The company’s enhanced network functions virtualization offering for services to simplify consumption of F5 Network’s portfolio of VNFs (based on BIG-IP capabilities) is expected to give further impetus.

Moreover, F5 Networks’ growth opportunities in the security market are driven by its advanced Web Application Firewall (WAF). It is witnessing an expansion in its addressable market and revenue growth prospects on the back of its WAF offerings. The strong adoption of advanced WAF in existing as well as new customers is expected to continue in the to-be-reported quarter.    

Additionally, in the last reported quarter, customers increasingly deployed a combination of both the iSeries systems as well as software in multi-cloud environments. Customers are likely to continue to adopt F5 Networks’ offerings to securely and easily manage workloads across such mixed environment. This will boost the company’s top line.

In an effort to expand its stand-alone security portfolio, F5 Networks released the F5 Access Manager to enable organizations to migrate on-premise application functionality to the cloud. This technology is expected to gain momentum in the quarter.

However, higher spending on cloud and security is likely to lead to $23-$25 million of restructuring costs in the to-be-reported quarter. This might keep the margin slightly under pressure.

Moreover, a volatile spending environment and increasing competition remain headwinds for F5 Networks’ revenue growth. Notably, Cisco Systems CSCO poses the most significant competitive threat to F5 Networks, given the dominance of the former in the overall networking market.

Further, T-Mobile’s TMUS recent partnership with Cisco to build the largest virtual packet core in preparation of 5G has put further pressure on F5 Networks’ market share.


Also, competitor CheckPoint's CHKP commendable efforts in the soon-to-be-reported quarter, icluding its launch of Generation V security gateway and Sandblast Mobile 3.0 is a potential threat to F5 Networks' market share.

F5 Networks currently carries a ZacksRank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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