Nutanix (NTNX) to Post Q4 Earnings: What Lies in Store?

Nutanix Inc. NTNX is scheduled to release fourth-quarter fiscal 2019 earnings on Aug 28.

Notably, the company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 29.13%.

In the last reported quarter, Nutanix incurred loss of 56 cents per share, narrower than the Zacks Consensus Estimate of loss of 60 cents. However, the figure was wider than the year-ago quarter’s loss of 21 cents.

Moreover, revenues decreased 0.6% from the year-earlier quarter to $287.6 million, and also missed the consensus estimate of $296 million.

Nutanix Inc. Price and EPS Surprise

Nutanix Inc. Price and EPS Surprise

Nutanix Inc. price-eps-surprise | Nutanix Inc. Quote

What to Expect in Q4

For the fiscal fourth quarter, the company expects revenues to be between $280 million and $310 million, indicating a 3% year-over-year decline at the midpoint of $295 million. The Zacks Consensus Estimate for revenues is pegged at $293.27 million.

Nutanix expects non-GAAP loss per share to be 65 cents. The Zacks Consensus Estimate stands at a loss of 64 cents. The expected loss is significantly wider than loss of 11 cents reported in the fourth quarter of fiscal 2018.

Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider

Nutanix is benefiting from deal wins on the back of consistent execution in product, customer support and enterprise selling, which is leading to a deeper penetration among existing customers. A healthy pipeline of big deals is anticipated to be a tailwind for fiscal fourth-quarter top line.

The company continues to witness a strong adoption of its products. This trend is likely to aid Nutanix’s to-be-reported quarter’s performance. Increasing AHV (Acropolis Hypervisor Virtualization) adoption rate is expected to boost the top line. Moreover, continued growth in new solutions outside the core HCI platform is also encouraging.

However, the results might be significantly affected by the imbalance in lead generation spending coupled with a slower-than-expected sales hiring. The company’s efforts in the last reported quarter to ramp lead generation are expected to take a couple of quarters to reflect in its top-line performance.

Leadership changes, which affected the fiscal third quarter, are expected to negatively impact the fiscal fourth quarter as well.
   
The company also expects extended sales cycles due to the transition of its business model to a subscription-based one is expected to be an overhang on the top line. The new term- based software licenses, which have a higher revenue deferral rate compared to the life of device license, are likely to reduce the upfront revenues for the quarter.

Moreover, intense competition from VMware VMW and Cisco CSCO is a concern.

What Does the Zacks Model Say?

The proven Zacks model shows that 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.

Nutanix has a Zacks Rank #4, and an Earnings ESP of +4.80%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here is a stock worth considering with the right mix of elements to beat estimates this earnings season:

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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