NetApp Inc. NTAP delivered solid second-quarter results as cost cutting boosted margins. Further, the company’s third-quarter earnings forecast came in above Street view.
Guidance
For the January quarter, NetApp guided sales/EPS of $1.325 billion–$1.475 billion/$0.72–$0.77. The sales forecast bracketed consensus estimate of $1.36 billion and EPS coming above consensus expectations of $0.65.
Citi's Take
Citi’s Jim Suva, who has a Neutral rating on the stock, laid out five positives from NetApp’s print:
- “EPS beat by $0.06 due to cost saving effort which drove operating margin outperformance of 160bps above consensus.”
- “EPS guidance for 3Q, beat consensus by $0.10 and sales guidance bracket consensus estimates.”
- “All flash array business saw triple digit growth y/y with an annualized run rate over $1 billion, with All flash FAS remaining a strong selling point with customers looking to improve existing infrastructure and processes.”
- “NetApp remains on track to achieve both long term growth and the target operating range (15 percent to 17 percent in FY17 and 18 percent in FY18).”
- “Continue to take share from competitors.”
Suva also raised his target price to $39 from $33 on improving margins and better opex management. The revised target implies a potential return of 12.3 percent over November 16 close.
“We continue to be positive on management’s ability to decrease OpEx and improve margins,” Suva wrote in a note.
Another Voice From The Street
At last check, shares of NetApp had climbed 8.79 percent on the day to $37.78.
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