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Factors to Note Ahead of NetApp's (NTAP) Q4 Earnings Release

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NetApp NTAP is slated to release fourth-quarter fiscal 2022 earnings on Jun 1.

The company projects non-GAAP earnings for the fiscal fourth quarter to be between $1.21 and $1.31 per share. The Zacks Consensus Estimate is pegged at $1.27 per share, suggesting an improvement of 8.6% from the year-ago quarter’s reported figure.

The company expects net revenues in the range of $1.635-$1.735 billion. The Zacks Consensus Estimate is pegged at $1.68 billion, suggesting growth of 8.3% year over year.

The company beat estimates in all of the last four quarters. It has a trailing four-quarter earnings surprise of 10.7%, on average.

Shares of NetApp have lost 5.6% of their value in the past year compared with the industry's decline of 8.6%.

NetApp, Inc. Price and EPS Surprise

 

NetApp, Inc. Price and EPS Surprise
NetApp, Inc. Price and EPS Surprise

NetApp, Inc. price-eps-surprise | NetApp, Inc. Quote

 

Factors to Note

Rapid cloud migration and digital transformation endeavors by enterprises across the globe are driving demand for the company’s diversified portfolio of offerings. NetApp specializes in providing cloud services, systems and software to business organizations to help them optimally operate their applications from the data center to the cloud. The continuation of work from home and hybrid work innovation are other driving factors.

Apart from these factors, NetApp’s strengthening go-to-market activities, various cloud collaborations and continued product innovation are likely to have acted as tailwinds.

Synergies from the buyouts of CloudCheckr and Data Mechanics is likely to have acted as tailwinds. In the fiscal fourth quarter, NetApp acquired Fylamynt for an undisclosed financial terms.  Fylamynt provides CloudOps automation technology that allows clients to create, deploy and manage workflows across any cloud environment with minimal coding requirements. Fylamynt is slated to become part of NetApp’s Spot portfolio of products to automate its cloud operations infrastructure.

In April 2022, NetApp also inked an agreement to acquire Instaclustr for undisclosed financial terms.

Instaclustr provides open-source database, pipeline and workflow applications delivered as a service. The integration of Instaclustr’s fully-managed database and data pipeline services along with NTAP’s can storage and compute optimization capabilities will provide clients with a comprehensive Cloud Operations platform. Instaclustr will be a part of the company’s Spot by NetApp portfolio of solutions. The company concluded the takeover in May 2022.

Coming to the segments, strength in the company’s object storage and all-flash business is expected to have contributed to the Hybrid Cloud segment’s revenues in the to-be-reported quarter. Software product revenues are likely to have gained from the favorable mix shift to the all-flash portfolio.

For the fiscal fourth quarter, the Zacks Consensus Estimate for the Hybrid Cloud segment’s revenues is pegged at $1.55 billion.

Increasing clout of Spot by NetApp portfolio — which facilitates enterprises to make multi-cloud management easier and lower expenses — might have aided the Public Cloud services business. The company recently rolled out Spot Security, which enhances cloud infrastructure security by delivering continuous AI-powered security services. The higher uptake of Azure NetApp files, Cloud Volumes and Cloud Insights services are also likely to have driven the company’s Public Cloud services business.

In the last reported quarter, Public Cloud Services recorded annualized recurring revenues (ARR) of $469 million, up 98% year over year and 21% quarter over quarter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for the Public Service segment’s revenues is at $129 million.

Incremental gains from an uptick in the company’s NetApp Astra solution and NetApp ONTAP data management software might have favored the top line.

However, pandemic-induced supply chain headwinds and substantial increases in costs are major concerns. The company expects supply chain troubles to affect product revenues and product gross margins in the fiscal fourth quarter. The company expects gross margin to be 64% (negatively impacted by open market component purchases) and operating margin to be 22% in the to-be-reported quarter. NetApp noted that without recent supplier decommits, the operating margin in the current quarter could have been near 25%.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

NetApp has an Earnings ESP of -0.09% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 this season.

Kroger KR has an Earnings ESP of +4.35% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Designer Brands (DBI) is set to release first-quarter fiscal 2022 results on Jun 2. The Zacks Consensus Estimate for earnings is pegged at 23 cents per share, suggesting an increase of 92% from the prior-year quarter’s reported figure. Shares of Designer Brands have decreased 9.4% in the past year.

Veeva Systems VEEV has an Earnings ESP of +0.36% and a Zacks Rank of 2 at present.

Veeva Systems is scheduled to release first-quarter fiscal 2023 results on Jun 1. The Zacks Consensus Estimate for earnings is pegged at 92 cents per share, suggesting an increase of 1.1% from the prior-year quarter’s levels. Shares of VEEV have decreased 41% in the past year.

Casey General Stores CASY has an Earnings ESP of +0.38% and a Zacks Rank of 3.

Casey General Stores is scheduled to release fourth-quarter fiscal 2022 results on Jun 7. The Zacks Consensus Estimate for earnings is pegged at $1.54 per share, up 37.5% from the year-ago quarter’s levels. Shares of CASY have declined 4.9% in the past year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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