NetApp Q2 Earnings: Can NTAP Hit Its $0.94 EPS Target?

in EARNINGS/INVESTING IDEAS by

NetApp, Inc. (NASDAQGS:NTAP) recently introduced a new program, Keystone, at the company’s annual user conference called Insight. The goal of the Keystone program is to offer a simpler way for customers to experience the benefits of the public cloud on premises.

As the company’s chief executive George Kurian described it at the conference, “NetApp Keystone enables you to simplify the business of hybrid cloud data services.” In essence, via Keystone Subscription Services, customers can click and subscribe to the performance tier and storage solution that makes sense for them.

NetApp is scheduled to report Q2 earnings results on November 13, 2019. The company is expected to report earnings of $0.94/share on revenue of $1.386 billion. The consensus earnings per share (EPS) of $0.94/share is based on a poll of 27 analysts and represents a decline of -11.3% over the same quarter last year when the company reported earnings of $1.06/share.

The revenue forecast of $1.386 billion based on a poll of 24 analysts implies a year-over-year (YoY) decline of -8.6%. Last year the company reported $1.517 billion in revenue for the quarter.

Expected to report EPS decline of -$0.12/share for Q2, 2019
Metric Expected Prior Year YoY Change
Revenue $1,386.00 $1,517.00 -8.6%
EPS $0.94 $1.06 -11.3%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter.

What are your expectations from NetApp for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2020 $0.58 $0.65 12.1% Beat
Q4, 2019 $1.26 $1.22 -3.2% Missed
Q3, 2019 $1.15 $1.20 4.3% Beat
Q2, 2019 $0.99 $1.06 7.1% Beat
Q1, 2019 $0.80 $1.04 30.0% Beat
Q4, 2018 $1.01 $1.05 4.4% Beat
Q3, 2018 $0.90 $0.99 10.0% Beat
Q2, 2018 $0.69 $0.81 17.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-14 $46.99 $46.47 -1.1% Decline
2019-05-22 $69.99 $61.66 -11.9% Decline
2019-02-13 $67.14 $63.66 -5.2% Decline
2018-11-14 $78.89 $68.88 -12.7% Decline

After the last earnings report for the period ending July 26, 2019, the stock price reacted by falling by -1.1%.

Fundamentals And Technical Analysis

NetApp is currently trading at $60.48/share, up 0.6% for the day. The company is trading at approximately 72.0% of its 52 week high of $83.95/share. The company’s stock price is up 28.7% since the last earnings report and up 3.9% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 67.13 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 14.5x and a forward P/E multiple of 14.6x.

NetApp’s current share price also implies a price-to-book (P/B) multiple of 16.6x. The following table summarizes some other key fundamental ratios:

Data as of November 13, 2019
Metric Value
Last Fiscal Period FY2020.Q1
Period End Date July 26, 2019
Stock Price (Current) $60.48
P/E Ratio 14.5x
P/E Ratio (Fwd) 14.6x
PEG Ratio 2.3
Total Debt to Capital (%) 10.8%
Levered Free Cash Flow $1.184 billion
Enterprise Value / EBITDA 10.5x

Company Profile: NetApp, Inc.

NetApp, Inc. provides software, systems, and services to manage and share data on-premises, and private and public clouds worldwide. The company offers cloud data services, including NetApp Cloud Volumes Service for AWS, NetApp Cloud Volumes ONTAP, NetApp Cloud Sync, NetApp Cloud Secure, NetApp Cloud Tiering, NetApp SaaS Backup, NetApp Kubernetes Service, and NetApp Cloud Insights. It also provides cloud infrastructure solutions, such as FlexPod, a portfolio of pre-validated designs and integration; NetApp HCI for public cloud consumption experience; and NetApp StorageGRID, a software-defined object-based storage solution.

The company also offers storage systems and software, including all-flash arrays that support data management; hybrid arrays to deploy the speed of flash storage; NetApp ONTAP storage operating system; NetApp ONTAP Select, which offers robust enterprise storage services; NetApp MAX Data; NetApp FlexArray storage virtualization software; NetApp OnCommand API Services; NetApp Active IQ software; NetApp data availability services; NetApp SnapCenter backup management software; NetApp SnapMirror data replication software; NetApp MetroCluster business continuity softwar; NetApp SnapLock data compliance software; NetApp SANtricity storage operating system; and NetApp Element operating system.

Further, it provides software maintenance, hardware maintenance, and other services, including professional services, global support solutions, and customer education and training. It serves the energy, financial services, government, high technology, Internet, life sciences, healthcare services, manufacturing, media, entertainment, animation, video postproduction, and telecommunications through a direct sales force and an ecosystem of partners.

NetApp, Inc. was founded in 1992 and is headquartered in Sunnyvale, California.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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