Model N's (MODN) Q4 Earnings To Be Hit By Stiff Competition

Model N Inc. (NYSE:MODN) is scheduled to report fourth-quarter fiscal 2017 earnings on Nov 7. We expect intense competition in the revenue management software market to mar results in the soon-to-be-reported quarter.

Notably, the stock beat the Zacks Consensus Estimate in all the trailing four quarters with an average positive earnings surprise of 14.19%. Last quarter, the company delivered a positive earnings surprise of 22.22%.

Moreover, the company surpassed the Zacks Consensus Estimate for revenues in two of the trailing four quarters.

Model N expects fourth-quarter GAAP revenues in the range of $34.6-$35.1 million. Non-GAAP operating loss is projected between $0.5 million and $1 million. Moreover, non-GAAP net loss is expected in the range of 8-9 cents per share.

Model N’s shares have returned 61.6% year to date, substantially outperforming the 29.6% rally of the industry.

Key Factors

Model N is benefiting from a growing customer base, transition to cloud-based applications and synergies from the Revitas acquisition.

The Revitas acquisition has expanded Model N’s product suite and customer base. Moreover, elimination of duplicated general & administrative and sales & marketing costs as well as redundant products outside the life sciences vertical is expected to lower spending.

However, we note that the company is yet to report profit. Further, the top-line growth has been unimpressive in the last two quarters, primarily due to increasing competition from well-established players like salesforce.com (NYSE:CRM) and Workday (NASDAQ:WDAY) .

Unfavorable Combination

We believe that Model N is unlikely to deliver a positive earnings surprise in the fourth quarter due to an unfavorable combination of Zacks Rank #3 (Hold) and Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here is a stock you may consider as our proven model shows it has the right combination of elements to post an earnings beat this quarter.

NVIDIA Corporation (NASDAQ:NVDA) has an Earnings ESP of +0.71% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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