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Will NetApp (NTAP) Disappoint Q4 Earnings Estimates? - Analyst Blog

Zacks Equity Research
Updated

NetApp Inc. NTAP is set to report fourth-quarter fiscal 2015 results on May 20. Last quarter, the company posted breakeven results. Furthermore, it is worth noting that the company has underperformed the Zacks Consensus Estimate twice, outperformed once and came in line with the estimates one time in the trailing four quarters with an average negative surprise of 0.12%.

Let us see how things are shaping up for this announcement.

Factors to Consider

The company is gaining momentum in flash-based solutions with the newly introduced all-flash array, which will help it to gain traction in the storage market. The recent product launches and product refreshes will drive the revenues and stringent cost controls will ensure margin expansion.

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However, we believe that an uncertain IT spending outlook and competition from EMC Corp. EMC remain the headwinds. Persistent decline in OEM revenues further add to the woes.

Earnings Whispers

Our proven model does not conclusively show that NetApp is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: NetApp’s Earnings ESP is -5.46% as the Most Accurate estimate of 52 cents per share is lower than the Zacks Consensus Estimate which is pegged at 55 cents.

Zacks Rank: NetApp carries a Zacks Rank #4 (Sell).

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

Stocks to Consider

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Intuit Inc. INTU, with an Earnings ESP of +2.33% and a Zacks Rank #2 (Buy).

Avago Technologies Limited AVGO, with an Earnings ESP of +1.64% and a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
EMC CORP -MASS (EMC): Free Stock Analysis Report
 
NETAPP INC (NTAP): Free Stock Analysis Report
 
INTUIT INC (INTU): Free Stock Analysis Report
 
AVAGO TECHNOLOG (AVGO): Free Stock Analysis Report
 
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Zacks Investment Research