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Proofpoint (PFPT) to Post Q4 Earnings: What's in the Offing?

Zacks Equity Research

Proofpoint, Inc. PFPT is set to report fourth-quarter 2019 results on Jan 30.

For the quarter, the company anticipates revenues of $237.5-$239.5 million and billings of $339-$343 million. The Zacks Consensus Estimate for revenues is pegged at $239.53 million, implying growth of 20.68% from the figure reported in the year-ago quarter.

Non-GAAP earnings are anticipated in a band of 47-50 cents per share. The Zacks Consensus Estimate is pegged at 48 cents per share, indicating a decline of 5.88% from the figure reported in the year-ago quarter.

The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 24.94%.

Let’s see how things are shaping up for the upcoming announcement.

Proofpoint, Inc. Price and EPS Surprise

Proofpoint, Inc. Price and EPS Surprise

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

Factors at Play

Robust demand for Email Fraud Defense and Threat Response solutions are expected to have positively impacted Proofpoint’s fourth-quarter 2019 performance. Its new offerings have expanded the total addressable market and are proving to be a key growth catalyst.

Moreover, a firm international footing is likely to have boosted Proofpoint’s upcoming quarterly results. The company is expanding abroad by dint of its international business, which accounted for 20% of its total revenues in the last reported quarter, growing 28% year over year.

Further, the company’s fourth-quarter results are likely to have gained from its technology partnerships with CrowdStrike CRWD and Okta OKTA. Such collaborations are driving the company’s pipeline and expanding its market reach.

Also, the completion of the buyout of ObserveIT in November last year is expected to have been slightly accretive to Proofpoint’s revenues and billings in the fourth quarter. Notably, the company expects billings of $339-$343 million, suggesting year-over-year growth of 26% at the midpoint ($341 million).

However, capital expenditures of approximately $14 million and asset depreciation of roughly $9 million are expected to weigh on fourth-quarter margins. Nonetheless, the company expects non-GAAP gross margin to be 79%, indicating an expansion of 10 basis points year over year.

Moreover, an exceptionally strong revenue performance in the fourth quarter of 2018, partly driven by around $3 million in revenue acceleration under ASC 606, is likely to have created a challenging baseline in the quarter under review due to the absence of a similar acceleration this year.

Also, the buyout of ObserveIT for $225 million is expected to have affected the cash reserves of the company in the fourth quarter of 2019.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Proofpoint this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Proofpoint has an Earnings ESP of -0.69% and a Zacks Rank #4 (Sell).

Stocks to Consider

Here is a stock you may consider, as our model shows that it has the right combination of elements to beat on earnings this season:

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +10.8% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Proofpoint, Inc. (PFPT) : Free Stock Analysis Report
 
Advanced Energy Industries, Inc. (AEIS) : Free Stock Analysis Report
 
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Okta, Inc. (OKTA) : Free Stock Analysis Report
 
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