Is Citrix Systems (CTXS) Poised to Beat Earnings in Q2?

Citrix Systems, Inc. CTXS, a leading provider of virtualization, networking and cloud computing solutions in the U.S., is slated to report its second-quarter 2014 financial numbers on July 23, 2014, after the closing bell.

In the previous quarter, Citrix reported a positive earnings surprise of 31.6%. Moreover, the company has outpaced the Zacks Consensus Estimate in all of the past four quarters with an average beat of 13.6%. Let's see how things are shaping up for this announcement.

Factors to Influence This Quarter

We believe that the shift in global trend toward virtualization and cloud computing will help Citrix maintain its favourable momentum over the coming quarters. Banking on these positives, the company raised its guidance for the second quarter as well as for fiscal 2014 on May 5, 2014.

In the first quarter of 2014, the company had achieved revenue growth across all its segments. Even outside the U.S., it continues to maintain strong revenue expansion. As a result, Citrix expects revenues to remain in the range of $765–$775 million in the second quarter, with an increase of 8.5% to 10% for the full year.

Citrix provides software and equipment for streamlining business computer systems. The demand for its products and services depends substantially upon the general demand for business-related computer appliances and software. Fluctuations in the demand for these products and services could lead to an adverse effect on the company's business, operational results and financials.

Earnings Whispers?

Our proven model does not conclusively show that Citrix Systems is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zero Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 41 cents.

Zacks Rank: Citrix Systems carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the Business Software & Services industry for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:  

Silicon Motion Technology Corp. SIMO, with earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

F5 Networks, Inc. FFIV, with earnings ESP of +3.8% and a Zacks Rank #2 (Buy).

Iron Mountain Inc. IRM, with earnings ESP of +13.89% and a Zacks Rank #2 (Buy).