Can Citrix Systems (CTXS) Pull A Surprise In Q2 Earnings?

Citrix Systems, Inc (NASDAQ:CTXS) – a leading global provider of virtualization, networking and cloud computing solutions – is slated to report second-quarter 2016 results on Jul 26, after market closes.

Last quarter, Citrix recorded a positive earnings surprise of 32.43%. The software company, in fact, has a healthy track record with respect to earnings, having delivered positive surprises in each of the last four quarters, with an average beat of 36.60%.

Factors at Play

Citrix is focused on innovation and provision of best services to its customers. The company operates in three main markets – desktop virtualization, cloud infrastructure in addition to collaboration and sharing. Citrix is expected to gain from an accelerating desktop virtualization market as it has become a top priority for any IT setup. Citrix’s practice of centralized management of employee desktops would result in greater security, resulting in better control and cost savings. Moreover, the company’s extended partnership with Microsoft Corporation (NASDAQ:MSFT) should boost top-line performance too.

However, a slowdown in economic growth and contraction in market share due to lower global demand for PCs and notebooks could hurt the company’s top line. Additionally, foreign exchange risks pose a threat to the company’s bottom line.

Earnings Whispers

Our proven model does not conclusively show that Citrix is likely to beat the Zacks Consensus Estimate 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for the company currently stands at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate are both pegged at 92 cents.

Zacks Rank: Citrix carries a Zacks Rank #1 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Please note, we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement,especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Open Text Corp. (NASDAQ:OTEX) has an earnings ESP of +1.10% and a Zacks Rank #1.

Bruker Corporation (NASDAQ:BRKR) has an earnings ESP of +5.26% and a Zacks Rank #1.