Network traffic management software provider Gigamon Inc. (GIMO) is set to report fourth-quarter 2014 results on Jan 29. Last quarter, the company posted a positive earnings surprise of 40%. Let us see how things are shaping up for this announcement.
Factors to Consider
Gigamon’s new and innovative product launches remain the growth catalysts. Its GigaSMART and GigaVUE-HC2 platforms are witnessing higher adoption. Moreover, the company is adding new clients, which is a positive.
However, the company has reported losses for consecutive three quarters which keeps us from being more positive on the stock. Moreover, the persistent underperformance of its service segment may affect the to-be-reported quarter results. Furthermore, with rising competition from other players such as Juniper Networks Inc. (JNPR) and Cisco, the company is witnessing pricing challenges. Therefore, to retain market share, the company may have to cut the prices of its products and services, in turn affecting profitability.
Earnings Whispers
Our proven model does not conclusively show that Gigamon is likely to beat the Zacks Consensus Estimate in the third 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.
Zacks ESP: ESP for Gigamon is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 2 cents.
Zacks Rank: Gigamon’s Zacks Rank #2 (Buy), when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Facebook Inc. (FB) has an Earnings ESP of +9.09% and a Zacks Rank #3 (Hold)
McGraw Hill Financial, Inc. (MHFI) has an Earnings ESP of +2.22% and a Zacks Rank #3
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