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VMware (VMW) Q4 Earnings: What's in Store for the Stock?

VMware, Inc.VMW is set to report fourth-quarter 2016 results on Jan 26, after the closing bell. Last quarter, the company reported better-than-expected results with adjusted earnings of 84 cents surpassing the Zacks Consensus Estimate by 5%. In the past four quarters, the company has posted an average positive earnings surprise of 1.33%.

In the past one year, VMware's shares increased 69.48%, compared with the Zacks Computer Software industry's rise of 21.88%.

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

Factors to Consider

VMware remains one of the leading companies in the virtualization and cloud computing market. The company continues to benefit from its strength in the virtualization and cloud computing market.

VMware caters to about two-third of the total server virtualization market with its innovative product pipeline, strategic partnerships, continuous contract wins and robust international sales, which are expected to drive overall results in the to-be reported quarter.

Despite these, the company has been seeing weakness in its core business for a while. The company's offerings of the newly developed cloud services like vCloud Air and vCloud Air Network along with its offerings like NSX, AirWatch, virtual SAN, VxRail continues to aid the company.

For fourth quarter 2016, the company expects the midpoint of its revenue range to be $1.990 billion and that of License revenues to be $850 million. Non-GAAP earnings per share are expected to be $1.39 at the midpoint.

However, rising competition from players like Microsoft MSFT remains a concern.

VMware Inc. Price and EPS Surprise

VMware Inc. Price and EPS Surprise | VMware Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that VMware is likely to 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. That is not the case here as you will see below.

Zacks ESP: VMware has an Earnings ESP of 0.00% as both the Most Accurate and the Zacks Consensus Estimate stand at $1.08. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: VMware currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

Stocks That Warrant a Look

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

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.

Te Connectivity TEL with an Earnings ESP of +1.00% and a Zacks Rank #2.

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Microsoft Corp. (MSFT): Free Stock Analysis Report

VMware Inc. (VMW): Free Stock Analysis Report

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

TE Connectivity Ltd. (TEL): 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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