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What's in Store for Fortinet (FTNT) this Earnings Season?

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Fortinet Inc. FTNT is set to report third-quarter 2015 results on Oct 22. Last quarter, the company posted a positive earnings surprise of 50%. Let us see how things are shaping up for this announcement.

Factors this Past Quarter

Fortinet reported better-than-expected second-quarter results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate. Also, revenues compared favorably on a year-over-year basis.

The year-over-year improvement was primarily aided by solid yields from sales and marketing strategies and strength in the network security market. A large number of deal wins and addition of customers during the quarter also contributed to the robust top line.

Recently, Fortinet in partnership with Splunk, Inc., a provider of a platform for machine data analytics software, had launched a cyber security app for enterprises and service providers.

Fortinet's FortiGate App for Splunk Enterprise uses the latter's platform to analyze log data produced by FortiGate appliances and thereby boosts threat detection and response times. It offers real time multivariate threat uncertainty, visualization and strange behavior detection within the framework of the organization's entire security data. Therefore, it enables enterprises and service providers to protect their networks from cyberattacks.

We believe that Fortinet is positive on a healthy network security market, its product line-up and investment plans.

Margin contraction due to continuous investments in research and development and competition from key network security players such as Cisco Systems Inc., Check Point CHKP , Juniper Networks and Palo Alto Networks remain concerns. However, product ramp ups, deal wins, continuous growth of the network security market and expected benefits from ongoing investments are the positives.

Earnings Whispers?

Our proven model does not conclusively show that Fortinet will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 4 cents. Hence, the difference is 0.00%.

Zacks Rank: Fortinet's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Fiserv, Inc. FISV Earnings ESP of +3.09% and a Zacks Rank #2 (Buy)

Apple Inc. AAPL Earnings ESP of +1.60% and a Zacks Rank #3.

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CHECK PT SOFTW (CHKP): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

FORTINET INC (FTNT): 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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