What's in the Cards for Splunk (SPLK) in Q4 Earnings?

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Splunk Inc.SPLK is scheduled to release fourth-quarter fiscal 2017 results on Feb 23. Splunk posted a negative surprise of 17.54% in the last quarter. The company has also posted an average negative surprise of 11.97% over the trailing four quarters. Let's see how things are shaping up for the upcoming announcement.

Factors to Consider

Splunk has been strengthening its product pipeline to benefit from the growing data and analytics market. Over the past few years, the cloud and data analytics market has seen strong growth especially in the enterprise domain, which is a positive for the company. Also, the company has been seeing an increase in the numbers of customers.

However, due to the ongoing transition, the license bookings businesshas started to slow down. Also, increasing investments in research and development coupled with higher operating costs are anticipated to be a drag on profitability. As Splunk continues to explore and expand into new markets, sales and marketing expenditures are also predicted to rise significantly, thereby hurting margins.

Also, growing competition from established players such as International Business Machines IBM , SAP, Amazon and Microsoft MSFT , all of which are vying to get a bigger share of the market, is a concern.

For the fourth quarter, Splunk expects revenues in a range of $286 million to $288 million and non-GAAP operating margin in a range of 8% to 9%.

Splunk Inc. Price and EPS Surprise

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

Earnings Whispers

Our proven model does not conclusively show that Splunk is likely to beat the Zacks Consensus Estimate 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 : Splunk's Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 57 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Splunk 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 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here's a stock that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter

The Priceline Group Inc. PCLN with an Earnings ESP of +0.46% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

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International Business Machines Corporation (IBM): Free Stock Analysis Report

The Priceline Group Inc. (PCLN): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Splunk Inc. (SPLK): 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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