Is A Beat In The Cards For VMware (VMW) In Q2 Earnings?

VMware Inc. (NYSE:VMW) is set to release fiscal second-quarter 2018 results on Aug 24.

Our proven model shows that VMware is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

The combination of VMware’s Zacks Rank #2 and Earnings ESP of +2.12% makes us very confident in looking for an earnings beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement.

Year to date, VMware has outperformed the industry. The stock has returned 31.7% compared with the industry’s gain of 23.1%.

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

Factors at Play

VMware’s strong product portfolio that includes NSX, AirWatch, vSphere and vSAN is the primary catalyst. The company continues to benefit from its strength in the virtualization and hybrid cloud market.

Moreover, strategic partnerships with the likes of Intel (NASDAQ:INTC) , Samsung (KS:005930), Fujitsu, Pivotal, Google (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT) will boost its presence in hybrid cloud computing as well as the fast growing Internet of Things (IoT) market. Moreover, frequent contract wins and robust international sales are expected to drive overall results.

Further, acquisitions such as that of Wavefront will boost VMware’s cross-cloud service providing abilities. Additionally, the planned divestiture of the vCloud Air will aid the company’s focus on the core business.

Vmware, Inc. Price and EPS Surprise

Vmware, Inc. Price and EPS Surprise | Vmware, Inc. Quote

Recently, the company reported robust preliminary results. For the second quarter, revenues are now expected to be in the range of $1.894 billion and $1.906 billion. The company had earlier guided revenues to be in the range of $1.840–$1.890 billion.

License revenues are now expected to be in the band of $727 million to $737 million as against earlier expectations of $695 to $725 million. Non GAAP earnings per share are expected to be in the range $1.15 to $1.19 compared with $1.11 to $1.14 expected earlier.

Given impressive quarterly performance and strength across portfolio, management also raised guidance for the current fiscal.

However sluggish IT spending as well as intensifying competition remain the major headwinds in the near term.

Stock to Consider

Here is a stock you may want to consider as our model shows that it has the right combination of elements to post an earnings beat:

Intuit Inc. (NASDAQ:INTU) has an Earnings ESP of +4.47% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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