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Proofpoint (PFPT) to Report Q4 Earnings: What's in Store?

Zacks Equity Research

Proofpoint Inc. PFPT is set to report fourth-quarter 2018 results on Jan 31.

The company beat the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 55.35%.

In the last reported quarter, the company delivered non-GAAP earnings of 40 cents, which soared 60% year over year and also outpaced the Zacks Consensus Estimate of 28 cents.

Moreover, revenues of $184.2 million surged 37% year over year and surpassed the Zacks Consensus Estimate of $181.7 million as well. This upside is mainly driven by customer additions, improved add-on-sales and a strong renewal rate.

What to Expect in Q4

For the fourth quarter, Proofpoint anticipates revenues of $191-193 million. The Zacks Consensus Estimate is pegged at $192.9 million, indicating year-over-year growth of 32.7%.

The company expects non-GAAP earnings in the range of 33-36 cents. The Zacks Consensus Estimate for earnings stands at 35 cents, up 20.7% from the year-ago quarterly figure.

Proofpoint, Inc. Price and EPS Surprise

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

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

Factors at Play

Proofpoint is benefiting from consistent focus on product launches, acquisitions and partnerships. New customers, better add-on-sales and a solid renewal rate are key growth drivers for the company.

Robust demand for the company’s next-generation SaaS-based security and compliance platform, ongoing transition to the cloud, particularly, Microsoft’s MSFT Office 365, and the rapidly growing threat landscape are considered key growth analysts.

On the last earnings call, management mentioned that the new offerings have expanded the total addressable market by more than $5 billion and are proving beneficial to growth. Management also expected many multi-year deals to be renewed in the fourth quarter.

Notably, Emerging products steadily surpass the rest of the company’s product portfolio, led by sturdy demand for Email Fraud Defense and Threat Response. Additionally, its Archiving solution is demonstrating a firm uptick, driven by customer interest and new features such as supervision, e-discovery analytics and Analytic Visualization in sectors, especially financial services and healthcare.

The company expects Compliance revenues to keep up the momentum as the bigger archiving deals in the pipeline continue to mature. The company’s Targeted Attack Protection or TAP offering remains a key growth booster, evident from its notable wins in the earlier reported quarter.

However, the deceleration in revenue growth rate is a concern. Notably, progress in the international market is expected to be hampered because of lower-than-expected expansion in international sales capacity over the course of the year.

Additionally, Proofpoint incurs a heavy investment in enhancing its sales and marketing capabilities, particularly by widening the company’s sales force to survive in the highly competitive cyber-security market. The company’s escalating operating expenses are anticipated to be an overhang on its bottom line.

What Our Model Says

Our proven Zacks model confirms that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. 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 0.00% and carries a Zacks Rank of 4, which decreases the predictive power of ESP. Therefore, this combination makes surprise prediction difficult.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right mix of elements to beat on earnings in the upcoming releases:

Twitter, Inc. TWTR has an Earnings ESP of +13.03% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

GTT Communications, Inc. GTT has an Earnings ESP of +173.53% and a Zacks Rank #2.

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