Yahoo Finance Factors to Note Ahead of Zscaler's (ZS) Q2 Earnings Release
Zscaler ZS is scheduled to report second-quarter fiscal 2023 results on Mar 2.
For the second quarter, Zscaler projects total revenues between $364 million and $366 million. The Zacks Consensus Estimate for the same is pegged at $363.8 million, suggesting growth of 42.4% from the year-ago quarter.
Zscaler anticipates non-GAAP earnings of approximately 29 to 30 cents per share. The Zacks Consensus Estimate for the bottom line stands at 29 cents per share.
The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 27.3%.
Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote
Factors to Consider
With hybrid work being normal at present, an increasing number of people have been logging into employers' networks through off-premises locations, which has triggered the need for greater security. This trend is anticipated to have spurred the demand for Zscaler’s products in the quarter under review.
Zscaler’s second-quarter results are likely to reflect the continued solid demand for its security and networking products, given the healthy environment of the global security market. The solid adoption of its in-cloud security platform, Zero Trust Exchange, due to the ongoing digital transformation across enterprises is likely to have acted as a key catalyst.
The increased adoption of Software-Defined Wide Area Network (SD-WAN) solutions might have acted as a key growth driver in the quarter to be reported. Per the latest MarketsAndMarkets report, the market size for SD-WAN solutions could reach $13.7 billion in 2027 from $3.4 billion in 2022, indicating a CAGR of 31.9% during the forecast period.
As there are only a few vendors that offer security and SD-WAN solutions, ZS has been capitalizing on the increasing opportunities in the market. The company’s collaboration with VMware and Silver Peak has been helping it secure SD-WAN deployments. This is likely to have positively impacted Zscaler’s fiscal second-quarter performance.
ZS’ existing core products, especially the Zscaler Internet Access and the Zscaler Private Access, have been driving customer retention. The addition of new capabilities to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for Software-as-a-service applications, is likely to have driven its product portfolio expansion and aided customer acquisition.
However, increased investments to enhance sales and marketing (S&M) capabilities and higher research and development (R&D) expenses may have weighed on the company’s to-be-reported quarter’s bottom line.
The company witnessed a year-over-year increase of 57.2% in non-GAAP S&M and 34.7% in non-GAAP R&D expenses in the last reported quarter. Total non-GAAP operating expenses climbed 52.9% year over year in the last reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
Zscaler has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. 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, Catalyst Pharmaceuticals CPRX, Rapt Therapeutics RAPT and Ulta Beauty ULTA have the right combination of elements to post an earnings beat in their upcoming releases.
Catalyst Pharmaceuticals has an Earnings ESP of +6.80% and sports a Zacks Rank #1 at present. The company is likely to report its fourth-quarter 2022 results on Mar 15. CPRX’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being negative 4.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Catalyst’s fourth-quarter earnings is pegged at 21 cents per share, indicating a 133.3% surge from the year-ago quarter’s earnings of 9 cents. The consensus mark for revenues stands at $60.3 million, suggesting a year-over-year increase of 57.4%.
Rapt Therapeutics has an Earnings ESP of +5.41% and currently has a Zacks Rank #2. The company is expected to report its fourth-quarter 2022 results on Mar 9. RAPT’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, missing once, the average surprise being 5.9%.
The Zacks Consensus Estimate for RAPT’s fourth-quarter loss stands at 67 cents per share, implying a year-over-year decline of 9.8%. The company is estimated to report revenues of $0.76 million, which is in line with the year-ago quarter.
Ulta Beauty has an Earnings ESP of +8.53% and carries a Zacks Rank #2 at present. The company is set to report fourth-quarter fiscal 2023 results on Mar 9. ULTA’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 26.2%.
The Zacks Consensus Estimate for ULTA’s quarterly earnings is pegged at $5.53 per share, suggesting a year-over-year increase of 2.2%. Its quarterly revenues are estimated to increase 10.3% year over year to $3.01 billion.
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Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
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Rapt Therapeutics (RAPT) : Free Stock Analysis Report
