We expect NetApp Inc. (NTAP) to beat expectations when it reports first-quarter 2014 results on Aug 14.
Why a Likely Positive Surprise?
Our proven model shows that NetApp is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.94%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of NetApp’ Zacks Rank #2 (Buy) and +2.94% ESP makes us very confident in looking for a positive earnings beat.
What is Driving the Better Than Expected Earnings?
NetApp has been witnessing growing demand for its ONTAP suite, higher sales of flash storage devices (led by growing demand for smartphones and tablets) and double-digit growth in branded products.
Moreover, favorable product mix and cost optimization are expected to positively impact the company’s margins. Association with Cisco Systems (CSCO) and VMware Inc. are the positives for the company.
Also, NetApp has surpassed estimates in three of the past four trailing quarters, which resulted in an average positive surprise of 8.35%.
Other Stocks to Consider
Apart from NetApp, we also expect earnings beat from the following stocks:
Computer Sciences Corporation (CSC), Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
Micron Technology Inc. (MU), Earnings ESP of +23.81% and a Zacks Rank #2 (Buy).
Read the Full Research Report on CSCO
Read the Full Research Report on NTAP
Read the Full Research Report on MU
Read the Full Research Report on CSC
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