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Post Earnings Coverage as NetApp Topped Earnings Estimates and Product Revenue up 7.5% Sequentially

Upcoming AWS Coverage on Brocade Communications Systems, Post-Earnings Results

LONDON, UK / ACCESSWIRE / November 28, 2016 / Active Wall St. announces its post-earnings coverage on NetApp, Inc. (NTAP). The company posted its financial results for the second quarter fiscal 2017 (Q2 FY17) on November 16, 2016. The storage equipment vendor's revenue missed analysts' expectations slightly; however numbers topped bottom-line. The Company forecasts Q3 FY17 to be above expectation. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of NetApp's competitors within the Data Storage Devices space, Brocade Communications Systems, Inc. (BRCD), reported on November 21, 2016, financial results for its fourth quarter and full fiscal year 2016 ended October 29, 2016. AWS will be initiating a research report on Brocade in the coming days.

Today, AWS is promoting its earnings coverage on NTAP; touching on BRCD. Get our free coverage by signing up to:



Earnings Reviewed:

During the quarter ended on October 28th, 2016, NetApp reported net revenues of $1.34 billion; an increase of approximately 3.5% sequentially and a decline of about 7% on a y-o-y basis. NetApp's product revenue of $710 million increased 7.5% sequentially and declined 13% compared to Q2 FY16. The company's sales numbers were slightly below market expectations of $1.35 billion.

The company's GAAP net income for Q2 FY17 totaled $109 million, or $0.38 per share, compared to GAAP net income of $114 million, or $0.39 per share, for the comparable period of the prior year. Adjusted for one-time items, NetApp earned $169 million, or $0.60 per share, compared to a non-GAAP net income of $181 million, or $0.61 per share in Q2 FY16. The earnings results surpassed analysts' expectations of adjusted earnings of $0.54 per share.

Margin Matters:

For Q2 FY17, NetApp reported gross margin of 62.7% which was within the company's guidance range. Product's gross margin of 48.2% decreased about 3.5 points from Q2 FY16 and increased 1.5 points sequentially. Software maintenance gross margin was relatively flat sequentially and year-over-year, while hardware maintenance and other services gross margin increased just over 3 points year-over-year.

Cost Savings:

In Q3 FY16, NetApp announced plans to reduce its cost structure by $400 million gross annualized by the end of FY17. The company stated that some of those savings will be reinvested into strategic opportunities such as SolidFire and will yield a net run rate savings annually of roughly $130 million by the end of FY17. On November 3, 2016, the company initiated a reduction of approximately 6% of its worldwide headcount which will result in a one-time charge of between $50 million to $60 million, primarily in Q3 FY17. NetApp stated that this action will yield an annual run rate savings of approximately $130 million.

Balance Sheet:

As of October 29th, 2016, NetApp had $4.4 billion in total cash, cash equivalents, and investments. During Q2 FY17, the Company generated $158 million in cash from operations and returned $169 million to shareholders through share repurchases and a cash dividend. NetApp also announced the next cash dividend of $0.19 per share. The quarterly dividend will be paid on January 25, 2017, to shareholders of record as of the close of business on January 6, 2017.


For Q3 FY17, NetApp is forecasting net revenues to range of $1.325 billion to $1.475 billion, which at the midpoint, implies a sequential increase of approximately 4% and a 1% increase year-over-year. The company is expecting Q3 gross margin in the range of 61.5% to 62.5% and operating margin between 18% and 18.5%. Finally, NetApp is projecting earnings per share for Q3 FY17 to range from approximately $0.72 to $0.77 per share. Analysts expected revenue of $1.37 billion.

Stock Performance:
NetApp's share price finished yesterday's trading session at $36.61, rising slightly by 0.72%. A total volume of 1.53 million shares exchanged hands. The stock has rallied 46.53% and 22.26% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the company have surged 41.75%. The stock is trading at a PE ratio of 33.28 and has a dividend yield of 2.08%.

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SOURCE: Active Wall Street