FireEye Inc.FEYE is set to report third-quarter 2015 results on Nov 4. Last quarter, the company posted loss per share of 78 cents, narrower than the Zacks Consensus Estimate of a loss of 84 cents.
Let us see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that FireEye is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate (loss of 82 cents per share) and the Zacks Consensus Estimate (loss of 88 cents), stands at +6.82%. This is very meaningful and indicates a likely positive surprise for shares.
Zacks Rank: FireEye has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 and 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of FireEye's Zacks Rank #2 and +6.82% ESP makes us very confident in looking for a positive surprise.
What is Driving the Better-than-Expected Results?
FireEye, headquartered in Milpitas, CA, is a global provider of web, email, file, and malware security to enterprises and governments. Despite the persistent macro uncertainty, the company seems positive backed by a healthy security market, strong product line-up, deal wins and investment plans which should boost results in the to-be-reported quarter.
FireEye's previous quarterly results show that it is gaining from the increasing demand for cyber security. Notably, the company has been witnessing a higher number of large deal signings over the past few quarters which should positively impact third-quarter results.
With the advancement in technology, more organizations are adopting a bring-your-own-device (BYOD) policy, which has enhanced employee productivity with anytime, anywhere access, while making it all the more necessary for the organizations to enforce data security measures.
Furthermore, since the beginning of 2015, numerous data breaches at high-profile business houses and government agencies prompted the need to impose tighter security measures, which in turn boosted the demand for cyber security products. Per Gartner, worldwide spending on IT security in 2014 was about $70 billion and is likely to reach $76.9 billion in 2015.
Additionally, in the first half of 2015, FireEye and VISA V collaborated to create tools and services to protect against cyber attacks. The first-of-its-kind partnership will generate incremental revenues for FireEye. All these factors are likely to aid FireEye's results in the to-be-reported quarter.
However, an uncertain economic environment, competitive pressure and currency headwinds remain concerns.
Key Picks in the Sector
Here are some other companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Facebook Inc. FB , with an Earnings ESP of +5.71% and a Zacks Rank #1.
CDW Corp. CDW , with an Earnings ESP of +2.63% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report