Factors Likely to Decide Nutanix's (NTNX) Fate in Q3 Earnings

Nutanix NTNX is slated to report third-quarter fiscal 2022 results on May 25.

The company expects revenues to be $395-$400 million. The Zacks Consensus Estimate for Nutanix’s third-quarter revenues is pegged at $398.3 million, suggesting growth of 15.6% from the year-ago reported figure.

The Zacks Consensus Estimate for the bottom line stands at a loss of 22 cents per share, which indicates a significant improvement from the year-ago quarter’s loss of 41 cents per share.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 43.3%.

Nutanix Price and EPS Surprise

Nutanix price-eps-surprise | Nutanix Quote

Factors to Note

Nutanix’s continued focus on enhancing its go-to-market productivity levels through efficient digital marketing spending, optimizing headcounts and leveraging its channel partners might have positively impacted the to-be-reported quarter’s performance.

The company anticipates Annual Contract Value (“ACV”) billings between $195 million and $200 million in the fiscal third quarter, suggesting year-over-year growth of 22-25%. Nutanix is likely to have witnessed significant sequential growth in emerging products ACV bookings in the to-be-reported quarter.

It expects the average contract term length to remain flat in the quarter under review primarily due to lower federal business. Note that the average contract term length declined to 3.1 years in the previous quarter from the year-ago quarter’s figure of 3.5 years.

Nutanix expects non-GAAP gross margin to be approximately 82%. The company manages expenses with several cost-reduction methods. This may have contributed to margins.

Non-GAAP operating expenses are projected in the range of $365 million to $370 million. In the quarter under review, Nutanix estimates utilization of free cash flow worth approximately $25 million.

Expansion in the company’s customer base as a consequence of the strategic partnership with Red Hat is likely to have contributed to the company’s third-quarter performance. Specifically, an increase in Acropolis Hypervisor Virtualization (“AHV”) adoption rate might get reflected in the to-be-reported quarter’s top line.

Nutanix’s fiscal second-quarter performance is likely to have benefited from robust growth in its hyper-converged solutions and automation services. The ongoing shift to cloud solutions due to the remote-working trend might have acted as a key catalyst in the quarter to be reported.

However, the ongoing transition to a subscription-based business model might have weighed on the fiscal third-quarter top line.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Nutanix this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Nutanix currently has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, Golar LNG Limited GLNG, Commercial Metals CMC and Star Bulk Carriers SBLK have the right combination of elements to post an earnings beat in their upcoming releases.

Golar LNG is slated to report first-quarter 2022 results on May 26. The stock has a Zacks Rank #1 and an Earnings ESP of +22.37%. Its earnings beat the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 49.8%.

The Zacks Consensus Estimate for GLNG’s quarterly earnings is pegged at 25 cents per share, suggesting a year-over-year improvement of 400%. Its quarterly revenues are estimated to decrease 22% year over year to $92.3 million.

Commercial Metals has a Zacks Rank #1 and an Earnings ESP of +38.66%. The company is scheduled to report third-quarter fiscal 2022 results on Jun 16. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 16%.

The Zacks Consensus Estimate for CMC’s third-quarter bottom line is pegged at $1.54 per share, suggesting year-over-year growth of 48.1%. The consensus mark for revenues stands at $2.19 billion, indicating a rise of 18.9% from the year-ago quarter.

Star Bulk has a Zacks Rank #2 and an Earnings ESP of +1.77%. The company is scheduled to report first-quarter 2022 results on May 24. It has surpassed the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed twice, the average negative surprise being 1.99%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for SBLK’s first-quarter earnings is pegged at $1.41 per share, suggesting year-over-year growth of 291.7%. The consensus mark for revenues stands at $338.6 million, indicating an increase of 68.9% year over year.

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