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What's in Store for Dell Technologies' (DELL) Q2 Earnings?

Zacks Equity Research

Dell Technologies DELL is set to release second-quarter fiscal 2020 results on Aug 29.

In the last reported quarter, the company posted non-GAAP net income of $1.6 billion, up 26% year over year.

Revenues increased 8% year over year to $24.01 billion and surpassed the Zacks Consensus Estimate of $23.46 billion. The increase was driven by double-digit growth in servers, momentum in VMware VMW and an expanding commercial client user base.

The Zacks Consensus Estimate for earnings has declined 2.5% to $1.15 over the past 30 days. The consensus mark for revenues is $22.50 billion, implying growth of 5.4% from the figure reported in the year-ago quarter.

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote

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

Factors to Watch

Dell is expected to benefit from its dominant position in the enterprise IT solutions market. Strong spending by customers on infrastructure is expected to be a key catalyst for the company in the to-be-reported quarter.

The company is also likely to gain from the ongoing momentum at VMware, in which it has a majority stake.

Notably, VMware reported an impressive second-quarter fiscal 2020. Non-GAAP earnings increased 3.9% year over year on revenues of $2.44 billion, which grew 12.2%.

Dell also owns stakes in Pivotal Software and SecureWorks.

Additionally, the company continues to gain share in the PC market. It was ranked third by Gartner and recorded sixth consecutive quarter of PC shipment growth in second-quarter 2019. While Dell’s market share of 16.9% in the period under consideration expanded 10 basis points (bps) year over year, shipment grew 2.1%, per Gartner data.

However, Dell’s focus on high-end notebooks and gaming negatively impacts its consumer business, revenues of which declined 10% year over year to $2.6 billion in the last reported quarter.

Additionally, the company faces stiff competition in the server and data storage equipment market from the likes of HP and Hewlett Packard Enterprise (in on-premise hardware).

What Our Model Says

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

Dell has a Zacks Rank #3 and an Earnings ESP of -4.06%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are a couple of stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Smartsheet SMAR has an Earnings ESP of +11.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verint Systems VRNT has an Earnings ESP of +3.49% and a Zacks Rank #3.

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Dell Technologies Inc. (DELL) : Free Stock Analysis Report
 
VMware, Inc. (VMW) : Free Stock Analysis Report
 
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