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F5 Networks (FFIV) to Report Q2 Earnings: What to Expect?

Zacks Equity Research
·4 mins read

F5 Networks FFIV is set to report second-quarter fiscal 2020 results on Apr 27.

For second-quarter fiscal 2020, F5 Networks expects revenues of $580-$590 million (mid-point $585 million). The Zacks Consensus Estimate for revenues is pegged at $569.9 million, suggesting growth of 4.6% from the year-ago reported figure.

The company anticipates non-GAAP earnings of $2.14-$2.16 per share. The Zacks Consensus Estimate is pegged at $2.04 per share, down two cents over the past week. The consensus mark indicates a year-over-year decline of 20.6%.

F5 Networks, Inc. Price and Consensus

F5 Networks, Inc. Price and Consensus
F5 Networks, Inc. Price and Consensus

F5 Networks, Inc. price-consensus-chart | F5 Networks, Inc. Quote

Notably, the company’s earnings surpassed estimates in three of the trailing four quarters and missed in the other, the average positive surprise being 1.3%.

Let’s see how things have shaped up for the upcoming announcement.

Factors at Play

The coronavirus outbreak, which continues to disrupt technology supply chains and logistics services across the globe, is likely to have affected F5 Networks’ fiscal second-quarter performance. Nonetheless, the company’s efficient inventory management is expected to have limited the impact of the pandemic.

In an Apr 20 update, F5 Networks noted that it has been able to maintain the flow of spare parts to depots and customers across the globe as its products are part of the essential category list. It has also managed to keep the required inventory level at 99% of all its depots globally.

Additionally, the work-from-home wave globally is bolstering demand for secured communication networks. We expect this new trend to also have positively impacted F5 Networks’ quarterly performance

F5 Networks is also likely to have benefited from its focus on transitioning the business to a software-driven model. Increasing demand for multi-cloud application services is expected to have been a key driver.

Rising traction of the Enterprise License Agreement (ELA) and annual subscriptions by customers are likely to have boosted software growth. This, in turn, is anticipated to have aided product revenue growth. The Zacks Consensus Estimate for product revenues at $257 million, indicating 8% growth from the year-ago quarter reported figure.

Moreover, the top line is likely to have benefited from significant contributions from NGINX, which was acquired by F5 Networks in the third quarter of fiscal 2019.

However, the company’s results will likely reflect its continued hardware-to-software transition. A slowdown in the company’s highly profitable traditional systems business is assumed to have kept the margin slightly stressed as well.

What Our Model Says

Our proven model does not predict an earnings beat for F5 Networks this season.The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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.

F5 Networks currently carries a Zacks Rank of 4 and has an Earnings ESP of -2.11%.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

InterDigital, Inc. IDCC has an Earnings ESP of +152% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ServiceNow, Inc. NOW has an Earnings ESP of +1.47% and currently carries a Zacks Rank of 3.

EPAM Systems, Inc. EPAM has an Earnings ESP of +0.55% and holds a Zacks Rank of 3 currently.

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