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NetApp (NTAP) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

NetApp Inc. NTAP is set to report fourth-quarter fiscal 2017 results on May 24. Notably, the company’s earnings have beaten the Zacks Consensus Estimate in three out of last four trailing quarters, with an average positive surprise of 19.53%.

Last quarter, the company reported a positive earnings surprise of 22.03%. Non-GAAP earnings (excluding stock-based compensation) of 82 cents per share increased 17.1% year over year and 36.7% sequentially.

Further, revenues increased 1.3% from the year-ago quarter and 4.8% from the previous quarter to $1.40 billion. The figure also beat the Zacks Consensus Estimate of $1.39 billion.

We note that the positive results have helped the stock price. NetApp shares have outperformed the S&P 500 on a year-to-date basis. While the stock has returned 13.8%, the index gained 5.5% over the same period.

Factors to Consider

We believe that the growing adoption of NetApp’s SolidFire (acquired in 2016) is a major tailwind for the company’s top-line growth.

NetApp, Inc. Price and EPS Surprise


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

Moreover, the company’s shift from data storage to data management and its expanding product portfolio are key catalysts. Further, the company is also focusing on expanding its international operations, which will further drive results.

However, tepid IT spending raises concerns about the company’s near-term performance. Intensifying competition from Western Digital WDC and HP Inc. add to its woes.

Earnings Whispers

Our proven model does not conclusively show that NetApp will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 68 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NetApp has a Zacks Rank #3, which increases the predictive power of ESP. However, Earnings ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Angie's List, Inc. ANGI with an Earnings ESP of +33.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Qumu Corporation QUMU with an Earnings ESP of +3.13% and a Zacks Rank #2.

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