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What Awaits Palo Alto Networks (PANW) in Q1 Earnings?

Palo Alto Networks, Inc.PANW is set to report first-quarter fiscal 2016 results on Nov 23. Last quarter, the company posted a negative earnings surprise of 91.3%. Moreover, Palo Alto has underperformed the Zacks Consensus Estimate in the trailing four quarters with an average negative earnings surprise of 153.9%.

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

Factors at Play

Palo Alto Networks offers a network security platform that helps firms, service providers and government bodies to impose tighter security measures. The company reported wider-than-expected loss in the fourth quarter of fiscal 2015 while revenues came ahead of the Zacks Consensus Estimate.

Revenue growth seems to be steady aided by strength across all its geographical regions and business segments. Also, customer wins coupled with expansion of existing customers positively impacted revenues. We believe that the company's product refreshes will boost revenues, going forward.

The company is also keen on expanding its cloud exposure. Nevertheless, a volatile spending environment and competition from Cisco Systems, Inc. CSCO and Check Point Software Technologies Ltd. remain concerns.

Earnings Whispers

Our proven model does not conclusively show that Palo Alto Networks will beat estimates 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: ESP for Palo Alto is 0.00%. This is because the Most Accurate estimate stands at a loss per share of 16 cents, in line with the Zacks Consensus Estimate.

Zacks Rank: Palo Alto's Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

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.

Stocks to Consider

Here are some companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Seadrill Partners LLC SDLP , with an Earnings ESP of +12.00% and a Zacks Rank #2

Dollar Tree, Inc. DLTR , with an Earnings ESP of +3.70% and a Zacks Rank #3

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DOLLAR TREE INC (DLTR): Free Stock Analysis Report

CISCO SYSTEMS (CSCO): Free Stock Analysis Report

PALO ALTO NETWK (PANW): Free Stock Analysis Report

SEADRILL PTNRS (SDLP): 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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