NetApp (NTAP) to Post Q3 Earnings: What's in the Cards?

NetApp Inc.NTAP is set to report third-quarter fiscal 2017 results on Feb 15. Last quarter, the company reported a positive earnings surprise of 10.53%. Excluding stock-based compensation, earnings declined 1.6% year over year but jumped 30.4% sequentially to 60 cents per share.

Further, revenues declined 7.3% from the year-ago quarter but increased 3.6% from the previous quarter to $1.34 billion. However, revenues missed the Zacks Consensus Estimate of $1.36 billion. We note that the company has missed the consensus revenue estimate in the three of the four trailing quarters.

NetApp's earnings have beaten the Zacks Consensus Estimate in two out of last four trailing quarters, with an average positive surprise of 14.02%.

NetApp, Inc. Price and EPS Surprise

NetApp, Inc. Price and EPS Surprise | NetApp, Inc. Quote

Moreover, NetApp shares have outperformed the Zacks Computer Storage Devices industry in the past one year. While the stock has gained 80.3%, the industry returned 65.2% over the same period.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

We believe that continued momentum in the flash-based solutions space, with the newly introduced all-flash array will drive NetApp's results going forward. Additionally, the company's improving penetration at the mid-size business segment is positive.

Moreover, NetApp's recent product launches and expanding product portfolio will drive top-line growth in the near term. Further, the company is focused on consolidating its international footprint.

However, tepid IT spending for the rest 2017 raises concerns about the company's near-term performance. Intensifying competition from Western Digital WDC and HP Inc. add to woes.

Earnings Whispers

Our proven model does not conclusively show that NetApp will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP : The Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 59 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : NetApp has a Zacks Rank #3, which increases the predictive power of ESP. However, Earnings ESP of 0.00% makes surprise prediction difficult.

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

Stocks to Consider

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

Applied Optoelectronics Inc. AAOI with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

ARRIS International plc ARRS with an Earnings ESP of +1.56% and a Zacks Rank #2.

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Western Digital Corporation (WDC): Free Stock Analysis Report

NetApp, Inc. (NTAP): Free Stock Analysis Report

ARRIS International PLC (ARRS): Free Stock Analysis Report

Applied Optoelectronics, Inc. (AAOI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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