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Palo Alto (PANW) to Report Q4 Earnings: What's in the Offing?

Palo Alto Networks PANW is slated to report fourth-quarter fiscal 2022 results on Aug 22.

Palo Alto projects year-over-year revenues of 25% to 27% to the $1.53-$1.55 billion range. The Zacks Consensus Estimate for the same is pegged at $1.54 billion, suggesting growth of 26.7% from the year-ago reported figure.

For the fourth quarter, PANW expects non-GAAP earnings in the range of $2.26-$2.29 per share. The consensus mark for the same stands at $2.28 per share, which indicates an increase of 42.5% from the year-ago quarter’s $1.60.

Palo Alto’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 7.1%.

Let’s see how things have shaped up before the announcement.

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. price-eps-surprise | Palo Alto Networks, Inc. Quote

Factors to Consider

Palo Alto’s performance in the quarter may have gained from the strong momentum stemming from deal wins. This is likely to have boosted revenues. The strong demand for form factor hardware products, particularly the machine learning-powered models that ensure zero-trust network security for organizations, is expected to have contributed to the quarterly performance.

Palo Alto has been gaining from the Bridgecrew acquisition, which forms the crux of the Prisma public cloud, and Xpanse, which forms the basis of Cortex. Prisma and Cortex are likely to have continued performing well in the fiscal fourth quarter as well.

The growing and accelerated migration to the cloud due to social-distancing regulations is likely to have boosted the adoption of the aforementioned platforms. The company projects year-over-year billings growth between 24% and 26% ($2.32 billion-$2.35 billion) during the to-be-reported quarter.

Additionally, amid the current hybrid working environment, the increased use of the cloud and remote networks resulted in escalating cyberattacks. This led to a rise in demand for cybersecurity solutions. PANW’s fiscal fourth-quarter performance is likely to have benefited from this demand surge.

Furthermore, Federal Risk and Authorization Management Program (FedRAMP) recognitions are boosting the adoption of Palo Alto’s products by government organizations. The company’s Prisma Access, Cortex XDR, Cortex Data Lake, Prisma Cloud and WildFire received FedRAMP recognitions.

This FedRAMP recognition reflects the trust that the U.S. public sector puts in Palo Alto’s IoT security solutions. This is anticipated to have encouraged the adoption of its products during the period in discussion.

However, higher sales incentives related to Next-Generation Security products are expected to have hurt the company’s bottom line. Additionally, forex headwinds and higher marketing and sales expenses might have weighed on the company’s profitability during the fiscal fourth quarter. Also, high acquisition-related expenses might have dragged down margins.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for PANW this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here.

Palo Alto currently carries a Zacks Rank of 2 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, Campbell Soup CPB, Oracle ORCL and Science Applications International SAIC have the right combination of elements to post an earnings beat in their upcoming releases.

Campbell Soup carries a Zacks Rank #2 and has an Earnings ESP of +0.67%. The company is expected to report fourth-quarter fiscal 2022 results on Sep 7. Campbell Soup’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CPB’s fourth-quarter earnings is pegged at 56 cents per share, indicating a year-over-year increase of 1.8%. The consensus mark for revenues stands at $1.97 billion, suggesting a year-over-year increase of 5.2%.

Oracle is expected to report first-quarter fiscal 2023 results on Sep 12. The company carries a Zacks Rank #2 and has an Earnings ESP of +1.41% at present. Oracle’s earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 5.8%.

The Zacks Consensus Estimate for quarterly earnings is pegged at $1.07 per share, suggesting a year-over-year improvement of 3.9%. ORCL’s quarterly revenues are estimated to increase 17.9% year over year to $11.47 billion.

Science Applications currently carries a Zacks Rank #3 and has an Earnings ESP of +1.19%. The company is slated to report its second-quarter fiscal 2023 results on Sep 1. Science Applications’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 23.6%.

The Zacks Consensus Estimate for Science Applications’ second-quarter earnings stands at $1.68 per share, implying a year-over-year decline of 14.7%. SAIC is estimated to report revenues of $1.82 billion, which suggests a decrease of 0.8% from the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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