NetApp (NTAP) Projections Exceeded Analysts' Estimates and Surges in Extended Hours

Shares of NetApp, Inc. (NTAP) surged up to 16% in after-hours trading session after a strong quarterly revenue forecast and higher-than-expected earnings. The main driver is a higher demand for data-storage services. Specifically, the firm projected revenue in the range of $1.4 billion to $1.5 billion for the fiscal Q2 ending in October while expectations were on average at $1.39 billion. The company also predicted a second-quarter profit, excluding charges, between $0.55 and $0.60 per share and beating analysts' estimates of $0.46.

NetApp posted a quarterly loss of $30 million, or $0.10 per share, lower than the profit of $88 million, or $0.27 per share obtained in the year-ago period.

Excluding items, it reported earnings per share of $0.29 for the three months ended in July, which were less than the $0.60 per share obtained in the same quarter a year ago but were higher than estimates by $0.06. On the other hand, revenue at $1.34 billion was higher by $0.02 billion than analyst's estimates but lower than the $1.49 billion obtained in the same time frame the year before.

NetApp provides software, systems and services to manage and store customer data. The firm is making efforts to invest in areas such as hybrid cloud, flash, converged infrastructure and software-defined storage. Also, investments are going to branding and campaigns. R&D activities are also performed around the world. Total R&D expenses were $919.3 million, $917.3 million and $904.2 million in fiscal 2015, 2014 and 2013, respectively.

"Our first fiscal quarter marks the beginning of a new chapter for NetApp. In the next phase of our journey, we are pivoting to address better the changing industry, to improving our own execution and to enhancing value for our shareholder", said George Kurian, chief executive officer.

The stock plummeted more than 28.5% in a year-to-date basis and almost the same in the past 12 months due to a steady decline in earnings growth over the past two years. Forward-looking, it is hard to predict technology trends. The future impact of these or the evolution of consumption or the acceptance of new products could hurt operating results or the financial condition in the future.

What is certain is that the stock is trading at its 52-week low, so maybe this represents an opportunity to buy a cheap stock. Further, the company returns value to shareholders via a $0.18 quarterly dividend that yields 2.30% annually and is above the median yield paid out by S&P 500 components.

Published on Aug 18, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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