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Can Citrix Systems (CTXS) Retain Earnings Beat Streak in Q1?

Zacks Equity Research

Citrix Systems, Inc. CTXS is slated to report first-quarter 2019 results on Apr 24.

Notably, the company’s beat the Zacks Consensus Estimate for earnings in the trailing four quarters, recording an average positive surprise of 11.6%.

In the last reported quarter, Citrix’s earnings and revenues improved on a year-over-year basis and surpassed the corresponding Zacks Consensus Estimates.

What to Expect in Q1

The company anticipates first-quarter net revenues in the range of $700 million to $710 million. Non-GAAP earnings are projected in the range of $1.15 to $1.20 per share.

Management expects the momentum in subscription based Workspace and Content Collaboration solutions to aid first quarter results on growth in Citrix Cloud subscriptions.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.16, indicating a decline of approximately 10.1% from the year-ago reported figure. The consensus estimate for revenues stands at $708.26 million, suggesting an improvement of 1.6% year-ago reported figure.

Citrix Systems, Inc. Price and EPS Surprise

Citrix Systems, Inc. Price and EPS Surprise | Citrix Systems, Inc. Quote

Let's see how things are shaping up prior to this announcement.

Factors at Play

As Citrix prioritizes transition to the cloud, it is witnessing a higher mix of product bookings which are subscription based. With an aim to capitalize on this growth, the company is making every effort to enhance subscription offerings with new capabilities which is expected to favor first quarter results.

The Zacks Consensus Estimate for Subscription revenues is pegged at $139 million, compared with the year-ago figure of $103.1 million.

Moreover, solid adoption of unified workspace solutions and hybrid cloud offerings hold promise. Furthermore, traction witnessed by ShareFile deserves a special mention. We believe the momentum is likely to continue evident from latest deal wins registered in the first quarter.

For instance, the company’s intelligent digital workspace solutions were selected by WellSpan Health to transform healthcare delivery mechanism in the quarter. Further, Miami Marlins baseball team implemented Citrix’s digital workspace solutions to provide an immersive entertainment experience. Notably, in the last-reported quarter, management stated that 50% of new product bookings in Workspace services were subscription based.

Additionally, acquisition of Cedexis has enabled the company to gain traffic management capabilities. With the enhanced engagement features, positions the company well to gain new enterprise customers in the quarter under review.

In the quarter under review, the company introduced innovations to Citrix SD-WAN solution with more security capabilities. This is likely to lead to new customer additions, consequently generating incremental revenues, favoring top-line growth. Also, to further enhance engagement, Citrix intends to make SD-WAN and ADC solutions available on Alphabet’s GOOGL Google Cloud Platform, which is a positive.

We believe synergies from buyouts, strategic alliances and addition of innovative capabilities are likely to act as tailwinds for impending first-quarter results.

However, Citrix anticipates headwind from networking hardware business to have been substantial in the quarter under review primarily due to the seasonal volatility in orders from hyperscale customers.

Favorable ESP

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. 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.

Citrix Systems has a Zacks Rank #3 and an Earnings ESP of +2.83%, which raises confidence about a possible earnings surprise.

Other Stocks to Consider

Here are some other stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming release:

Xilinx, Inc. XLNX has an Earnings ESP of +2.03% and a Zacks Rank #2. The company is slated to report fourth-quarter fiscal 2019 earnings on Apr 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and a Zacks Rank #2 stock. The company is set to report first-quarter 2019 earnings on May 2.

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