Yahoo Finance Should F5 (FFIV) be in Your Portfolio Ahead of Q2 Earnings?
F5, Inc. FFIV, a multi-cloud application services and security company, is set to report second-quarter fiscal 2024 results after market close on Apr 29.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 5.3%. F5 projects non-GAAP revenues in the $675-$695 million band (midpoint of $685 million) and non-GAAP earnings per share in the $2.79-$2.91 band (midpoint of $2.85) for the second quarter of fiscal 2024.
The Zacks Consensus Estimate for F5’s second-quarter earnings has been revised upward by a penny to $2.88 per share over the past 30 days and indicates an improvement of 13.8% from the year-ago quarter’s earnings of $2.53. The consensus mark for revenues stands at $686.9 million, which calls for a 2.3% decrease from the year-ago quarter.
In the last reported quarter, FFIV’s non-GAAP earnings of $3.43 per share surpassed the Zacks Consensus Estimate by 40 cents and came 39% higher than the year-ago quarter’s $2.47 per share. Revenues of $693 million beat the consensus mark of $687.1 million but declined 1% on a year-over-year basis.
Despite facing headwinds in recent quarters, FFIV has shown resilience and remains a dominant player in the networking and application delivery space. With F5 gearing up to report its Q2 earnings, let’s evaluate whether now is the right time to buy this networking giant.
F5, Inc. Price and EPS Surprise
F5, Inc. price-eps-surprise | F5, Inc. Quote
Should You Add FFIV to Your Portfolio Now?
F5 is one of the major players in the application delivery controller (ADC) market, offering vital products for data center consolidation, virtualization and cloud services. Additionally, F5 has gained significant market share due to Cisco's shift away from the core ADC market. It is also a major developer and provider of software-defined application services, ensuring secure, speedy and accessible applications across IP networks on any device and at any time.
F5 stands out to benefit from the booming application networking market. With a strong hold in Layer 4-7 content switching and a solid position in data centers, the company is poised to expand market share, especially given the increasing demand for capacity and security in next-gen applications.
The growing demand for cloud-based applications, digital transformation and cybersecurity solutions bodes well for F5's long-term growth prospects. As organizations increasingly rely on application delivery and security services to support their digital initiatives, FFIV stands to benefit from these trends.
While F5's financial performance in recent quarters has been mixed, with revenues and earnings fluctuating due to macroeconomic factors and industry dynamics, the company's resilient business model and cost optimization efforts have helped mitigate some of these challenges.
F5 collaborated with industry leaders, including Microsoft, Oracle, VMware, Cisco Systems and HP, to offer integrated application services for their Software Defined Networking offerings. It has also partnered with Amazon Web Services, Microsoft Azure, VMware vCloud Air, Cisco ACI and others for cloud-based application services. These partnerships increase access to new tech, aid product innovation, strengthen F5's cybersecurity suite, support joint sales and marketing efforts and enhance its competitive edge.
The company is altering its business model by focusing on subscription-based services, which generate steady revenues and increase profits. The company has also made cost-saving moves like reducing staff, trimming facility space and cutting travel. These initiatives are aimed at lowering operating expenses and improving margins in the short run.
In conclusion, F5 presents an intriguing investment opportunity ahead of its Q2 earnings. Despite near-term challenges, the company's strong fundamentals, growth initiatives and market positioning make it a compelling choice for investors seeking exposure to the networking and cybersecurity sectors. While volatility in the broader market and industry-specific headwinds may impact FFIV's short-term performance, its long-term prospects remain promising.
Additionally, F5 is among such stocks that have been left behind this year’s tech rally. The stock has gained 1.6% YTD, while the Zacks Internet - Software industry has risen 14.6% during the same time frame. Moreover, F5 currently trades at an attractive valuation multiple. The stock trades at a one-year forward price-to-earnings multiple of 13.65X compared with its five-year average of 29.59X. It also trades at a discount to the Zacks Internet - Software industry’s one-year forward price-to-sales multiple of 35.03X.
Therefore, considering the company’s impressive growth profile and attractive valuation, we believe it is the right time to invest in the stock.
Earnings Whispers
Our proven model predicts an earnings beat for F5 this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($2.93 per share) and the Zacks Consensus Estimate ($2.88 per share), is +1.87%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: FFIV carries a Zacks Rank #2.
Other Stocks With the Favorable Combination
Per our model, Advanced Micro Devices AMD, Amazon AMZN and Corning GLW also have the right combination of elements to post an earnings beat in their upcoming releases.
Advanced Micro Devices carries a Zacks Rank #2 and has an Earnings ESP of +28.33%. The company is slated to report first-quarter 2024 results on Apr 30. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while matching on one occasion, with the average surprise being 3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Advanced Micro Devices’ first-quarter earnings stands at 60 cents per share, flat when compared to the year-ago quarter. It is estimated to report revenues of $5.42 billion, which suggests an increase of 1.2% from the year-ago quarter.
Amazon is slated to report first-quarter 2024 results on Apr 30. The company has a Zacks Rank #2 and an Earnings ESP of +6.19% at present. Amazon’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 51%.
The Zacks Consensus Estimate for first-quarter earnings is pegged at 82 cents per share, which suggests an increase of 164.5% from the year-ago quarter’s earnings of 31 cents. Amazon’s quarterly revenues are estimated to improve 11.9% year over year to $142.5 billion.
Corning carries a Zacks Rank #2 and has an Earnings ESP of +0.40%. The company is scheduled to report first-quarter 2024 results on Apr 30. Its earnings surpassed the Zacks Consensus Estimate once, matched one time and missed twice in the trailing four quarters, the average surprise being 0.12%.
The Zacks Consensus Estimate for Corning’s first-quarter earnings is pegged at 36 cents per share, which indicates a year-over-year decrease of 12.2%. The consensus mark for revenues stands at $3.12 billion, which calls for a year-over-year decrease of 7.2%.
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