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What's in the Cards for Axon Enterprise (AAXN) Earnings?

Zacks Equity Research

Axon Enterprise, Inc. AAXN is scheduled to report first-quarter 2019 results after the closing bell on May 9.
 
In the last reported quarter, the company’s sales increased 21.3% year over year to $114.8 million, beating the Zacks Consensus Estimate of $104.7 million. Adjusted earnings per share in the fourth quarter plunged 53% year-over-year to 8 cents. The top-line missed the Zacks Consensus Estimate of 11 cents as well. Nevertheless, the company delivered better-than-expected earnings in three of the trailing four quarters, recording a positive earnings surprise of a whopping 288.89%.
 
Let us see how things are shaping up for the company prior to this announcement.

Axon Enterprise, Inc Price and EPS Surprise

Axon Enterprise, Inc Price and EPS Surprise | Axon Enterprise, Inc Quote

Earnings Whisper
 
Our proven model shows that Axon Enterprises is likely to beat estimates in the first quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:
 
Earnings ESP: Axon Enterprise has an Earnings ESP of +6.99%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 17 cents and 16 cents, respectively. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
 
Zacks Rank: The company currently has a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.
 
Conversely, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors to Consider
 
The company’s strategic growth areas include TASER weapons, Sensors hardware, including on-officer body cameras and Axon Fleet in-car video systems, Evidence.com connected software network, and Axon Records and Computer Aided Dispatch software. These value streams have an estimated total addressable market of $8.4 billion, comprising TASER weapons ($1.8 billion), hardware sensors ($0.8 billion) and cloud-based public safety software ($5.8 billion.) The company continues to expand product offerings and introduce multiple software/service solutions. Axon Enterprise will continue to benefit in the first quarter from its expanded product offerings and strong execution.
 
The company’s TASER Weapons segment will continue to gain from the increased sales of products, and improved sales under the Officer Safety Plan and TASER 60 purchase programs. At the International Association of Chiefs of Police Conference in early October 2018, Axon Enterprise introduced TASER 7, its most effective TASER weapon with improved performance across all key metrics. This, in turn, will lead to increased effectiveness, reduced size and ease of use. This will serve as a material catalyst for customers to replace the old TASER weapons. It started shipping in the fourth quarter of 2018. Axon Enterprise also unveiled its first LTE-connected body camera, Axon Body 3 in the fourth quarter, which is expected to begin shipping in the second half of 2019.

Moreover, the company earlier expected revenues in the range of $480-$490 million in 2019, driven by new cloud-connected products, which include TASER 7 and Axon Fleet 2. Revenues for first-quarter 2019 will likely be up 8-9% year over year.
 
The Software and Sensors segment will gain as the company continues to add users to its network resulting in steady product revenues. It will also benefit from increased aggregate users which resulted in improved Evidence.com and extended warranty revenues. Continued adoption of Axon Cloud, drove year-over-year revenue growth of 63.6% in the fourth quarter. This is anticipated to drive segment revenues in first-quarter 2019 as well. Further, Axon Fleet will contribute to the top line in the to-be-reported quarter.    
 
Notably, bookings related to the company's Software and Sensors segment were $110 million in the fourth quarter, up 54% year over year reflecting, strength across product offerings, including domestic body cameras and Axon Fleet 2. As of Dec 31, 2018, Software & Sensors backlog jumped 41% year over year to $758 million. This bodes well for the company’s first-quarter 2019 performance.
 
In May, Axon Enterprise closed the acquisition of VIEVU, a public safety camera provider. The buyout led to the addition of five major U.S. cities’ police departments, and also added Mexico City and Mexico's Federal Police. However, there was an issue regarding a VIEVU LE5 camera overheating with a major customer. The issue has been resolved, and the customer will accelerate their transition from VIEVU cameras to Axon Body 2 cameras and Axon Evidence. Nevertheless, the transition may result in some incremental expense in the March-end quarter.
 
The Zacks Consensus Estimate for total revenues for first-quarter 2019 is pegged at $110 million, projecting year-over-year growth of 9%. The Zacks Consensus Estimate for earnings is pegged at 16 cents for the quarter under review, down 50% from 32 cents per share reported in the prior-year quarter.

Price Performance

In the last year, the company’s shares have surged 45.4%, outperforming the industry’s growth of 7.1%.



Stocks Worth a Look

Here are some stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Aurora Cannabis Inc. ACB has an Earnings ESP of +55.88% and holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ardelyx, Inc. ARDX has an Earnings ESP of +6.09% and carries a Zacks Rank #3.
 
Best Buy Co., Inc. BBY has an Earnings ESP of +0.31% and carries a Zacks Rank #3.

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