U.S. Markets open in 1 hr 53 mins

Model N's (MODN) Q4 Earnings to be Hit by Stiff Competition

Zacks Equity Research

Model N Inc. MODN is scheduled to report fourth-quarter fiscal 2017 earnings on Nov 7. We expect intense competition in the revenue management software market to mar results in the soon-to-be-reported quarter.

Notably, the stock beat the Zacks Consensus Estimate in all the trailing four quarters with an average positive earnings surprise of 14.19%. Last quarter, the company delivered a positive earnings surprise of 22.22%.

Moreover, the company surpassed the Zacks Consensus Estimate for revenues in two of the trailing four quarters.

Model N expects fourth-quarter GAAP revenues in the range of $34.6-$35.1 million. Non-GAAP operating loss is projected between $0.5 million and $1 million. Moreover, non-GAAP net loss is expected in the range of 8-9 cents per share.

Model N’s shares have returned 61.6% year to date, substantially outperforming the 29.6% rally of the industry.



Key Factors

Model N is benefiting from a growing customer base, transition to cloud-based applications and synergies from the Revitas acquisition.

Model N, Inc. Price and EPS Surprise


Model N, Inc. Price and EPS Surprise | Model N, Inc. Quote


The Revitas acquisition has expanded Model N’s product suite and customer base. Moreover, elimination of duplicated general & administrative and sales & marketing costs as well as redundant products outside the life sciences vertical is expected to lower spending.

However, we note that the company is yet to report profit. Further, the top-line growth has been unimpressive in the last two quarters, primarily due to increasing competition from well-established players like salesforce.com CRM and Workday WDAY.

Unfavorable Combination

We believe that Model N is unlikely to deliver a positive earnings surprise in the fourth quarter due to an unfavorable combination of Zacks Rank #3 (Hold) and Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here is a stock you may consider as our proven model shows it has the right combination of elements to post an earnings beat this quarter.

NVIDIA Corporation NVDA has an Earnings ESP of +0.71% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Model N, Inc. (MODN) : Free Stock Analysis Report
Workday, Inc. (WDAY) : Free Stock Analysis Report
Salesforce.com Inc (CRM) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research