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Proofpoint (PFPT) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Proofpoint Inc. PFPT is set to report first-quarter 2017 results on Apr 20. Last quarter, the company’s loss was wider than expected. However, Proofpoint outperformed the Zacks Consensus Estimate thrice in the trailing four quarters. It has an average positive surprise of 13.33%.

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

Factors to Consider

Proofpoint is a leading security-as-a-service provider, which focuses on cloud-based solutions for threat protection, compliance, archiving & governance, and secure communications.

According to a Markets and Markets report, the cyber security market will touch $202.36 billion in 2021 from $122.45 billion in 2016, representing a compounded annual growth rate of 10.6%. The favourable trend in the space is likely to aid Proofpoint’s first-quarter results.

Although Proofpoint witnessed remarkable top-line growth, on the back of consistent focus on launching products, acquisitions and partnerships, the company has failed to deliver on the bottom line.

It should be noted that over the past few years, Proofpoint invested heavily to enhance its sales and marketing capabilities, particularly by expanding the company’s sales force, in order to survive in the highly competitive cyber security market. Notably, the company’s expenses escalated approximately three-fold to $461 million in 2016 from $124 million in 2012. This adversely affected Proofpoint’s bottom-line results.

Since Proofpoint continues to invest in sales and marketing, we anticipate this to remain a drag on the company’s first-quarter bottom line.

Earnings Whispers

Our proven model does not conclusively show that Proofpoint will beat on earnings estimates 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. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 35 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Proofpoint carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

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.

Proofpoint, Inc. Price and EPS Surprise

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

Stocks to Consider

Here are few companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

NCR Corporation NCR, with an Earnings ESP of +4.35%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KLA-Tencor Corporation KLAC, with an Earnings ESP of +2.60% and a Zacks Rank #2.

Equifax Inc. EFX, with an Earnings ESP of +0.71% and a Zacks Rank #3.

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