VMware (VMW) To Report Q4 Earnings: What's In The Cards?

By Zacks Investment ResearchStock MarketsFeb 26, 2018 09:49PM ET

www.investing.com/analysis/vmware-vmw-to-report-q4-earnings-whats-in-the-cards-200294705

VMware (VMW) To Report Q4 Earnings: What's In The Cards?

By Zacks Investment Research | Feb 26, 2018 09:49PM ET

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VMware Inc (NYSE:VMW) is set to release fiscal fourth-quarter 2018 results on Mar 1.

In the last quarter, VMware’s non-GAAP earnings of $1.34 per share easily beat the Zacks Consensus Estimate of $1.27 while increasing 59.5% from the year-ago quarter.

Revenues of $1.98 billion also topped the consensus mark of $1.96 billion and increased 11.1% on a year-over-year basis. At the end of the quarter, unearned revenues were $5.6 billion.

Year to date, VMware has outperformed the industry. The stock has returned 42% compared with the industry’s gain of 37.3%.

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

Factors at Play

VMware’s strength in the virtualization and hybrid cloud market is a key growth driver. The company’s top line is likely to be driven by robust performance of its product offerings like NSX, vSphere and vSAN.

The introduction of two major offerings, VMware AppDefense and Pivotal Container Service (PKS), in the last reported quarter is also expected to yield positive results.

We believe that along with expanding product portfolio, partnerships with the likes of Intel (NASDAQ:INTC), Samsung (KS:005930), Fujitsu, Pivotal, Alphabet (NASDAQ:GOOGL), AWS and Microsoft (NASDAQ:MSFT) and continuing enterprise deal wins will remain tailwinds. Vmware is also witnessing strong and balanced growth in all three geographies.

In the quarter, the company completed the acquisition of VeloCloud Networks that will enable it to enhance its product offerings and gain more customers.

However, heavy spending on R&D may weigh on its margins. Moreover, intensifying competition from Microsoft and Citrix Systems (NASDAQ:CTXS) remains a major headwind.

Vmware, Inc. Price and EPS Surprise

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

What Our Model Says

According to the Zacks model, 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. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

VMware has an Earnings ESP of +0.28% and a Zacks Rank #3. Therefore, the company is likely to deliver a positive surprise this quarter.

Other Stocks With a Favorable Combination

Here are some companies you may also want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Tech Data (NASDAQ:TECD) has an Earnings ESP of +0.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Red Hat (NYSE:RHT) has an Earnings ESP of +2.02% and a Zacks Rank #3.

Autodesk (NASDAQ:ADSK) has an Earnings ESP of +17.98% and a Zacks Rank #3.

Zacks Top 10 Stocks for 2018

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?

Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp (NYSE:FMC). and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

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Red Hat, Inc. (RHT): Free Stock Analysis Report

Vmware, Inc. (VMW): Free Stock Analysis Report

Autodesk, Inc. (ADSK): Free Stock Analysis Report

Tech Data Corporation (TECD): Free Stock Analysis Report

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VMware (VMW) To Report Q4 Earnings: What's In The Cards?

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