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What’s in Store for Pure Storage (PSTG) in Q3 Earnings?


Enterprise data storage firm Pure Storage, Inc. PSTG is scheduled to report third-quarter fiscal 2017 (ended Oct 2016) results after the market closes on Nov 30. In the last reported quarter, earnings beat the Zacks Consensus Estimate by 8.8%. Over the trailing four quarters, the company missed earnings estimates twice with an average negative earnings surprise of 5.01%.

Let’s see how things are shaping up for this announcement.

Key Factors in the Third Quarter

During the quarter, Pure Storage enhanced its FlashStack Converged Infrastructure Solution by collaborating with Cisco Systems CSCO. This move facilitates easy deployment, expansion and maintenance of the solution for FlashStack customers. Pure Storage and Cisco have a number of collaborations for various technologies.

While the FlashArray product line addresses structured workloads, FlashBlade has been designed to tackle unstructured workloads. Such collaborations augur well for both the companies but are likely to have a minimal impact on the to-be-reported quarter's earnings.

The company has also announced the availability of petabyte-scale storage utilized for mission-critical cloud IT, the next-generation of FlashArray//m. This will give its customers a wider range of products to choose from and will enhance the company’s sales.

The data storage industry is touted as one of the hi-tech industries to watch out for in the coming years and is reportedly on the cusp of a revolutionary change. Storage systems, based entirely on flash chips similar to the ones used in smartphones, are expected to ultimately replace high-performance disk drive systems. With cutting-edge flash storage technology that is comparatively less expensive, Pure Storage is rapidly gaining traction and is likely to record healthy top-and bottom-line growth in the to-be-reported quarter.

The company focuses on research and development, primarily upgrading its existing products, while also developing new ones. These upgradations and innovations, however, come at a high cost. Such costs can be a drag on the company’s income in the to-be-reported quarter.

PURE STORAGE Price and EPS Surprise

PURE STORAGE Price and EPS Surprise | PURE STORAGE Quote

Earnings Whispers

Our proven model does not conclusively show that Pure Storage will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%.

Zacks Rank: Pure Storage has a Zacks Rank #4 (Sell).

As it is we caution against stocks with Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of companies which per our model, have the right combination of elements to post an earnings beat this quarter:

Golar LNG Ltd. GLNG has an Earnings ESP of +7.14% and Zacks Rank #3.

PVH Corp. PVH has an Earnings ESP of +0.42% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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