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Will VMware (VMW) Disappoint this Earnings Season?

Zacks Equity Research

VMware, Inc. (VMW) is set to report second quarter 2014 results on Jul 22. Last quarter, it posted a 1.82% positive surprise. The company has posted an average positive earnings surprise of 5.96% over the past four quarters.  

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

Growth Factors this Past Quarter

We believe that VMware’s ability to innovate, enter into new technological collaborations and solutions, along with its existing product pipeline and strategic investments will drive the top line over the long term.

 Its continuous contract wins, robust international sales and the acquisitions of Desktone and AirWatch will boost revenues, going forward.

Additionally, the strategic alliances that it has formed with companies like Google, F5 Networks and Nvidia will enhance its desktop-as-a-service (daas) offering, which in turn will aid growth, going forward.

However, sluggish IT spending and stiff competition from the likes of Microsoft and Citrix Systems remain a major headwind going forward.

Earnings Whispers?

Our proven model does not conclusively show that VMware is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 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 stand at 53 cents. Hence, the difference is of 0.00%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Silicon Motion Technology Corp. (SIMO), Earnings ESP of +33.33% and Zacks Rank #1 (Strong Buy).

F5 Networks (FFIV), Earnings ESP of +3.81% and Zacks Rank #2 (Buy).

Iron Mountain (IRM), Earnings ESP of +13.89% and Zacks Rank #2.

Read the Full Research Report on VMW
Read the Full Research Report on IRM
Read the Full Research Report on FFIV
Read the Full Research Report on SIMO

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