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Proofpoint (PFPT) to Post Q2 Earnings: What Lies Ahead?

Zacks Equity Research

Proofpoint, Inc. PFPT is scheduled to report second-quarter 2019 results on Jul 25.

Notably, the company outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 39.79%.

In the last reported quarter, Proofpoint’s earnings increased 33.33% year over year to 40 cents per share, topping the Zacks Consensus Estimate of 34 cents. The company’s revenues jumped 25% to $203 million and beat the consensus estimate of $200 million.

Outlook and Estimates for Q2

For the second quarter, Proofpoint anticipates revenues of $210-$212 million and billings of $228-$230 million. The Zacks Consensus Estimate for revenues is pegged at $211.6 million, suggesting a 23.11% increase from the year-ago reported figure.

Non-GAAP earnings per share are anticipated in the band of 34-37 cents.  The Zacks Consensus Estimate for second-quarter earnings is pegged at 36 cents, indicating 38.46% improvement from the year-ago reported figure.

Free cash flow is estimated in the range of $25-$27 million.

Let's see how things are shaping up for this announcement.

Proofpoint, Inc. Price and EPS Surprise

Proofpoint, Inc. Price and EPS Surprise

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

Factors at Play

Proofpoint’s second-quarter results are likely to be driven by its solid product portfolio.

The company is benefiting from robust demand for Email Fraud Defense and Threat Response. Its new offerings have expanded the total addressable market, and are proving to be a key growth catalyst.

A firm international footing is likely to boost Proofpoint’s upcoming quarterly results. The company is expanding abroad by dint of its international business, which accounted for 19% of its total revenues in the last reported quarter.

Moreover, partnerships with CyberArk CYBR, Okta, Palo Alto Networks PANW, and Splunk SPLK are major positives for Proofpoint. These collaborations are driving the company’s pipeline and expanding its market reach. Further, these are expected to have influenced large deals in the to-be-reported quarter.

However, capital expenditures of approximately $9 million and asset depreciation of approximately $8 million are expected to weigh on second-quarter margins. Nonetheless, the company estimates non-GAAP gross margin to be around 78%, which is higher than 77.1% recorded in the second quarter of 2018.

Also, management states that the full impact of the winding down of Cloudmark OEM business will be realized in the second quarter and throughout the year.

Further, in May this year, Proofpoint announced that it has entered into a definitive agreement to acquire Meta Networks, an innovator in zero trust network access, to boost its cloud-based architecture. The transaction, completed in the second quarter, will dent quarterly cash balance of the company.

Proofpoint currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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