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What's in the Cards for Fortinet (FTNT) in Q4 Earnings?

Fortinet Inc.FTNT is set to report fourth-quarter 2016 results on Feb 2. Last quarter, the company posted a positive earnings surprise of 133.33%. Notably, Fortinet has outperformed the Zacks Consensus Estimate twice while missing the same on two occasions in the trailing four quarters. It has an average negative earnings surprise of 95.84%.

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

Factors to Consider

Fortinet's network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration.

For the last two quarters, there has been a slowdown in Fortinet's sales. The company's last quarter revenues were negatively impacted by slower sales completion in the enterprise and service provider markets. Fortinet observed that organizations have been breaking their cybersecurity investment plans into phases and implementing the same over longer periods of time instead of making a single large investment.

Apart from this, the company's revenues are also likely to be hit by poor sales execution in the North America region and macro-economic issues in Latin America and the U.K. The company anticipates that the issues will take a few quarters to be fully resolved and has therefore lowered its billings, revenues and non-GAAP earnings outlook for 2016.

We anticipate the aforementioned challenges to negatively impact Fortinet's fourth quarter performance.

Nonetheless, product ramp-ups, deal wins, continuous growth in the network security market and expected benefits from the ongoing investments remain the positives, which may have a favorable impact on fourth-quarter results.

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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 8 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Fortinet carries a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

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

Fortinet, Inc. Price and EPS Surprise

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

Stocks to Consider

Here are some companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

CEVA Inc. CEVA , with an Earnings ESP of +9.52% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Twilio Inc. TWLO , with an Earnings ESP of +8.33% and a Zacks Rank #3.

Pandora Media Inc. P , with an Earnings ESP of +8.11% and a Zacks Rank #3.

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Fortinet, Inc. (FTNT): Free Stock Analysis Report

CEVA, Inc. (CEVA): Free Stock Analysis Report

Pandora Media, Inc. (P): Free Stock Analysis Report

Twilio Inc. (TWLO): 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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