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Palo Alto (PANW) to Report Q2 Earnings: What's in Store?

Palo Alto Networks Inc. PANW is slated to release second-quarter fiscal 2019 results on Feb 26.

Notably, the company surpassed the Zacks Consensus Estimate in each of the trailing four reported quarters, the average positive surprise being 8.21%.

In the last reported quarter, the company’s earnings and revenues recorded year-over-year improvement.

What to Expect in Q2?

For the fiscal second quarter, Palo Alto anticipates revenues of $675-$685 million, up 24-26% year over year. The Zacks Consensus Estimate is pegged at $682.8 million.

Non-GAAP earnings per share are expected in the range of $1.20-$1.22. This includes an expense of $10-$15 million associated with the latest consolidation. Moreover, the impact of U.S. tariffs on Chinese goods is also taken into consideration. The Zacks Consensus Estimate is pegged at $1.22, indicating a year-over-year increase of 41.9%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Palo Alto is benefiting from a healthy demand environment, product strength and an increasing adoption of the company’s next-generation security platforms.

Notably, the company is witnessing solid growth in customer acquisition, and also expanding its wallet share with the existing clientele. The continuous spending on security, backed by a large-scale upgrade in IT infrastructure and transition to cloud, bodes well for the company.

Palo Alto is also doing well in the federal space. With WildFire, its cloud delivered malware analysis service, achieving Federal Risk and Authorization Management Program and Ready status in the last reported quarter, Palo Alto will now be able to provide the advanced threat prevention and analysis capabilities to U.S. federal agencies.

Additionally, the company’s existing cloud partnerships with giants like Amazon’s AMZN AWS and Alphabet’s GOOGL Google Cloud are positives. It expects to stay strong in network security.

Palo Alto is currently focusing on selling more subscription-based services, which is a high gross-margin business (approximately 80%), compared with the hardware-centric model. This unique business model is helping it to generate stable revenues while expanding margins.

However, competition from several players in the security application market is a concern. Also, there are some established companies like Cisco CSCO and Juniper in the adjacent markets, further intensifying rivalry in the space.

Palo Alto currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.


Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. Price and EPS Surprise | Palo Alto Networks, Inc. Quote

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