NetApp Inc.NTAP is set to report first-quarter fiscal 2016 results on Aug 12. Last quarter, the company posted a positive earnings surprise of 14.55%. Furthermore, it is worth noting that the company has underperformed the Zacks Consensus Estimate twice, outperformed once and matched estimates once in the trailing four quarters with an average negative surprise of 0.99%.
Let's see how things are shaping up for this announcement.
Factors to Consider
NetApp reported dismal fourth-quarter fiscal 2015 results. Also, year-over-year comparisons on both counts were unfavorable. The year-over-year decline was primarily due to weakness in Americas commercial sales and unfavorable foreign exchange rates.
Nevertheless, 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. Recent product launches and product refreshes will drive revenues while stringent cost control will ensure margin expansion.
However, we believe that an uncertain IT spending outlook and competition from EMC Corp. EMC and Hewlett-Packard Company remain headwinds.
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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 6 cents. Hence, the difference is 0.00%.
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:
The Madison Square Garden Company MSG , with an Earnings ESP of +4.76% and a Zacks Rank #3 (Hold)
Ryerson Holding Corporation Com RYI , with an Earnings ESP of +20.00% and a Zacks Rank #3
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.