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What's in the Offing for Pure Storage (PSTG) in Q1 Earnings?

Zacks Equity Research

Pure Storage Inc. PSTG is set to release first-quarter fiscal 2020 earnings on May 21. Notably, the company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with an average positive surprise of 45.9%.

Past-Quarter Performance

In the last reported quarter, Pure Storage reported non-GAAP earnings of 14 cents per share, missing the Zacks Consensus Estimate of 18 cents. However, the figure increased on a year-over-year basis.

Although total revenues surged 24% from the year-ago quarter to $422.2 million, it lagged the Zacks Consensus Estimate of $443 million.

What to Expect in Q1?

Pure Storage expects revenues of $327-$339 million in first-quarter fiscal 2020. The Zacks Consensus Estimate for revenues is pegged at $333.8 million, indicating growth of approximately 30.4% from the year-ago quarter.

We note that the Zacks Consensus Estimate for earnings has remained unchanged in the past week. The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 8 cents per share, suggesting a decline of approximately 14.3% from the year-ago quarter’s tally.

Notably, shares of Pure Storage have returned 31.6% on a year-to-date basis, substantially outperforming the industry’s rally of 9.9%.

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

Factors Likely to Influence Q1 Results

Robust business fundamentals, strong FlashBlade implementation, higher adoption of new products and strong go-to-market strategies are likely to boost the top line in the to-be-reported quarter.

Pure Storage recently unveiled flash and cloud-based ObjectEngine solution. Further, the company launched DirectFlash Fabric for end-to-end NVMe and NVMe-oF support, helping customers to enhance performance of mission-critical applications and web-scale applications. This in turn will aid the upcoming quarterly results.

The company is rapidly gaining traction in the flash storage market, which is evident from its expanding customer base. Strength in product portfolio including the likes of FlashArray, FlashStack and FlashBlade business segments is projected to positively impact the to-be-quarter results.

Notably, in the last reported quarter, Pure Storage added more than 400 customers, bringing the total base to more than 5,850 organizations. Management remains elated on strong growth witnessed in Global 2000, Fortune 500, big government organizations and healthcare companies, and leading 1000 cloud vendors. The momentum is expected to aid the first-quarter results.

Pure Storage’s first-ever buyout of StorReduce remains a notable development in the quarter under review. Management remains elated on gaining StorReduce’s de-duplication technology. 

The company expects to better manage unstructured data across multi-cloud environments with the buyout, which will positively impact the to-be-reported quarter’s results.

Pure Storage’s notable collaborations with Cisco and NVIDIA among others position its portfolio favorably and are likely to aid its business. Notably, we believe that the company dominates the space, driven by its robust all-flash and NVMe portfolio, leaving companies like NetApp, Dell EMC and Hewlett Packard Enterprise trailing.

We believe the recent buyouts, collaboration synergies and product rollouts bodes well for Pure Storage.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Pure Storagehas a Zacks Rank #3 and an Earnings ESP of 0.00%. This combination makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in its upcoming release:

NIKE, Inc. NKE has an Earnings ESP of +2.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Box, Inc. BOX has an Earnings ESP of +3.85% and a Zacks Rank #3.

Dillard's, Inc. DDS has an Earnings ESP of +0.06% and a Zacks Rank #3.

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