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

Zacks Equity Research

F5 Networks Inc. FFIV is set to report fourth-quarter fiscal 2019 results on Oct 23.

Although the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the same missed the mark once, the average positive surprise being 3.85%.

For fourth-quarter fiscal 2019, F5 Networks expects revenues in the range of $577-$587 million (mid-point is $582 million). The Zacks Consensus Estimate for revenues is pegged at $582.8 million, suggesting a 3.6% increase from year-ago reported figure.

The company anticipates non-GAAP earnings per share in the band of $2.53-$2.56.  The current Zacks Consensus Estimate for the same stands at $2.55, indicating a decline of 12% from the prior-year reported number.

F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. Price and EPS Surprise
F5 Networks, Inc. Price and EPS Surprise

F5 Networks, Inc. price-eps-surprise | F5 Networks, Inc. Quote

A Look at Q3 Results

In the last reported quarter, the company delivered earnings per share of $2.52, which lagged the Zacks Consensus Estimate of $2.57 but inched up 3.3% year over year.

Meanwhile, F5 Networks revenues rose 4% year over year to $563.4 million and also beat the Zacks Consensus Estimate of $555 million.

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

Factors at Play

F5 Networks’ fourth-quarter fiscal results are likely to have benefited from the company’s focus on transitioning its business to a software-driven model.

Growth of applications and rising demand for the company’s multi-cloud application services are likely to have remained a tailwind. Increasing adoption of the Enterprise License Agreement (ELA) and annual subscriptions among customers are likely to have boosted software growth.

Notably, software growth has most likely continued in the to-be-reported quarter, consistently aided by security use cases including web application firewall, bot-defense and mitigation.

Significantly, the acquisition of Nginx, which closed in the June quarter, is expected to have contributed below $8 million in revenues in the quarter to be reported.

However, persistence of the company’s hardware-to-software transition is likely to get reflected in its impending results. Slowdown in the company’s highly profitable traditional systems business is assumed to have kept the margin slightly stressed as well.

Moreover, macroeconomic uncertainties in the regions like the UK and Germany as a key headwind might reflect on the upcoming quarterly release.

The bottom-line number is expected to reflect the impact of increasing operating expenses associated with the NGINX buyout in the to-be-reported results.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for F5 Networks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although F5 Networks has a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Arrow Electronics, Inc. ARW has an Earnings ESP of +0.60% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet, Inc. AVT has an Earnings ESP of +2.68% and is Zacks #3 Ranked.

DHI Group, Inc. DHX has an Earnings ESP of +9.09% and is a #3 Ranked player.

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