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Factors Setting the Tone for Pure Storage (PSTG) Q3 Earnings

Pure Storage Inc. PSTG is set to report third-quarter fiscal 2019 earnings on Nov 19.

Notably, the company beat the Zacks Consensus Estimate for earnings in the trailing four quarters, recording average positive surprise of 78.5%.

In the last reported quarter, Pure Storage delivered non-GAAP earnings of 1 cent per share comparing favorably with the Zacks Consensus Estimate of a loss of 5 cents. The figure also compared favorably with the year-ago loss of 11 cents per share.

Total revenues surged 37.5% from the year-ago quarter to $308.9 million and came ahead of the Zacks Consensus Estimate of $302 million. Revenues also outpaced management’s guided range of $296-$304 million. Robust business fundamentals and strong go-to-market strategies drove year-over-year growth.

Moreover, Gartner placed Pure Storage “as a leader in their Magic Quadrant” for the fifth consecutive year.This dominance of Pure Storage can be attributed to strength in all-flash and NVMe portfolio, leaving companies like NetApp, Dell EMC and Hewlett Packard Enterprise trailing.

What to Expect?

Pure Storage envisions third-quarter fiscal 2019 revenues in the range of $361 million to $369 million. The corresponding Zacks Consensus Estimate is pegged at $366.6 million, near the higher-end of the guided range, indicating growth of approximately 32% from the year-ago quarter.

We note that the Zacks Consensus Estimate for earnings has remained stable in the past week. The Zacks Consensus Estimate for the quarter under review is pegged at 9 cents per share, compared with the year-ago quarter’s loss of a cent.

Factors Likely to Influence Q3 Results

Pure Storage’s first-ever buyout of StorReduce remains a notable development in the quarter under review. Management remains elated on gaining StorReduce’s de-duplication technology.

The acquisition is expected to strengthen the company’s object storage portfolio and also bolster the public cloud integrations. Further, the company expects to better manage unstructured data across multi-cloud environments with the buyout.

Pure Storage is rapidly gaining traction in the flash storage market, which is evident from its expanding customer base. Strength in product portfolio including the likes of FlashArray, FlashStack and FlashBlade business segments is projected to boost the top line.

In the second quarter, the company added more than 400 new customers, bringing the total base to 5,150 organizations. Moreover, management remains elated on traction witnessed in Global 2000, big government organizations and healthcare companies, and leading 1000 cloud vendors.

Notably, in the quarter under review, Salinas Valley Memorial Healthcare System (SVMHS) selected the company’s all-flash solution to accelerate healthcare application processes and improve staff productivity.

Pure Storage strength in all-flash solutions also enabled it to expand presence in the local and state government market. The company bagged statewide contracts of NYS OGS in New York and 204X – IT Infrastructure Solutions in North Carolina.

Pure Storage has introduced FlashStack with FlashBlade to speed up the analytics processes for the data warehouses, which is anticipated to deliver incremental revenues in the quarter under review. Recently, the company launched a data hub to provide organizations with a storage infrastructure to support data-intensive and unstructured workloads by eliminating data silos.

Furthermore, Pure Storage’s notable collaborations with Cisco CSCO and NVIDIA NVDA, among others bode well.

Cisco’s tie-up with the company’s FlashStack has significantly accelerated overall converged infrastructure and integrated systems markets. The company strengthened its partnership with NVIDIA, a dominant player in AI related computation, to expand product offerings. Notably, the company has released AIRI in collaboration with NVIDIA.

Pure Storage, Inc. Price and EPS Surprise


Pure Storage, Inc. Price and EPS Surprise | Pure Storage, Inc. Quote

What the Zacks Model Unveils?

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Pure Storage has a Zacks Rank #3 and an Earnings ESP of 0.00% which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock That Warrants a Look

Here is a stock, which, as per our model, has the right combination of elements to post an earnings beat this quarter:

Bitauto Holdings Limited BITA has an Earnings ESP of +12.36% and a Zacks Rank #2. The company is slated to report third-quarter 2018 earnings on Nov 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

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