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Factors Likely to Impact Axon Enterprise's (AAXN) Q4 Earnings

Zacks Equity Research

Axon Enterprise, Inc. AAXN is scheduled to report fourth-quarter 2018 results after the closing bell on Feb 26.


In the last reported quarter, the company’s earnings of 20 cents per share surpassed the Zacks Consensus Estimate of 12 cents. The bottom line also improved substantially from the prior-year quarter’s figure of 5 cents. The company has delivered better-than-expected results in the trailing four quarters, recording a positive earnings surprise of 391.67%.


Let us see how things are shaping up for the company prior to this announcement.


Axon Enterprise, Inc Price and EPS Surprise


Axon Enterprise, Inc Price and EPS Surprise

Axon Enterprise, Inc price-eps-surprise | Axon Enterprise, Inc Quote

Earnings Whisper


Our proven model does not conclusively show that Axon Enterprises is likely to beat estimates this earnings season. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below:


Earnings ESP: Axon Enterprise has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 11 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.


Zacks Rank: The company currently has a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.


Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.


Factors to Influence Q4 Results


The company’s strategic growth areas include TASER weapons, Sensors hardware including on-officer body cameras and Axon Fleet in-car video systems, Evidence.com connected software network, and Axon Records and Computer Aided Dispatch software. These value streams have an estimated total addressable market of $7.7 billion, comprising TASER weapons ($1.5 billion), hardware sensors ($0.7 billion), and cloud-based public safety software ($5.5 billion.) The company continues to expand product offerings and introduce multiple software/service solutions. Axon Enterprise will continue to benefit in the fourth quarter from its expanded product offerings and strong execution.


The company’s TASER Weapons segment will continue to gain from the increased sales of products, and improved sales under the Officer Safety Plan and TASER 60 purchase programs. At the International Association of Chiefs of Police Conference in early October, Axon Enterprise introduced TASER 7, its most effective TASER weapon with improved performance across all key metrics. This in turn will lead to increased effectiveness, reduced size and ease of use. This will serve as a material catalyst for customers to replace the old TASER weapons. It started shipping in the fourth quarter.


The Software and Sensors segment will gain as the company continues to add users to its network resulting in steady product revenues. It will also benefit from increased aggregate users which resulted in improved Evidence.com and extended warranty revenues. Continued adoption of Axon Cloud, drove year-over-year revenue growth of 47% in the third quarter. It is anticipated to drive segment revenues in the fourth-quarter 2018 as well. Further, Axon Fleet will contribute to the top line in the to-be-reported quarter.


Notably, bookings related to the company's Software and Sensors segment were $93 million in the third quarter, up 19% year over year. As of Sep 30, 2018, Software & Sensors backlog was approximately $700 million. This bodes well for fourth-quarter performance.


In May, Axon Enterprise closed the acquisition of VIEVU, a public safety camera provider. The buyout led to the addition of five major U.S. cities’ police departments and also added Mexico City and Mexico's Federal Police. However, there was an issue regarding a VIEVU LE5 camera overheating with a major customer. The issue has been resolved and the customer will accelerate their transition from VIEVU cameras to Axon Body 2 cameras and Axon Evidence. The transition may result in some incremental expense in the fourth quarter.


The Zacks Consensus Estimate for total revenues for fourth-quarter 2018 is pegged at $104.7 million, projecting year-over-year growth of 10.6%. The Zacks Consensus Estimate for earnings is pegged at 11 cents for the to-be-reported quarter, down 38.9% from 18 cents per share reported in the prior-year quarter.


Price Performance



In the last year, the company’s shares have soared 94%, against the industry’s decline of 8%.


Stocks to Consider


Here are some stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.


Athene Holding Ltd. ATH has an Earnings ESP of +2.29% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.


The Mosaic Company MOS has an Earnings ESP of +2.11% and a Zacks Rank #2.


Sun Hydraulics Corporation SNHY has an Earnings ESP of +0.84% and a Zacks Rank #3.


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