VMware (VMW) To Report Q3 Earnings: What's In The Cards?

VMware (NYSE:VMW) is set to release third-quarter fiscal 2019 results on Nov 29.

In the last reported quarter, VMware’s non-GAAP earnings of $1.54 per share beat the Zacks Consensus Estimate by a nickel and increased 14.1% from the year-ago quarter.

Revenues of $2.17 billion also topped the consensus mark of $2.15 billion and improved 12.5% on a year-over-year basis. Strong top-line growth was primarily driven by robust performance from NSX and vSAN product lines.

For third-quarter fiscal 2019, revenues are expected to be $2.165 billion, up 11.7% year over year. Non-GAAP earnings are anticipated to be $1.50 per share.

The Zacks Consensus Estimate for revenues and earnings currently stand at $2.17 billion and $1.50, reflecting year-over-year growth of 11.9% and 9.7%, respectively.

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

Factors to Watch

VMware outperformed the industry on a year-to-date basis. The stock has returned 22% compared with the industry’s rally of 14.5%. The momentum can be attributed to the continuing enterprise deal wins that are likely to drive growth in the to-be-reported quarter.

VMware continues to witness robust growth in the virtualization market, driven by its portfolio strength. Moreover, the company’s dominance in software-defined data center (SDDC) along with expanding customer base in cloud, driven by partnerships with the likes of IBM (NYSE:IBM) , Amazon (NASDAQ:AMZN) Web Services (AWS) and CenturyLink (NYSE:CTL) , is a positive.

VMware’s NSX solution has also gained significant adoption with 82 companies of the Fortune 100 now using the networking solution. Further, strong End-User Computing (EUC) license bookings, driven by Workspace ONE, is a key catalyst.

Notably, VMware exited second-quarter with $141 million of license backlog compared with $122 million at the end of first quarter fiscal 2019.

Furthermore, VMware continues to win accolades, industry wise. In July 2018, VMware was positioned at the top by market research firm, Gartner in its Magic Quadrant for Unified Endpoint Management Tools. Again, the company was recently positioned at the top by Gartner in its inaugural Magic Quadrant for WAN Edge Infrastructure.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

VMware has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock with Favorable Combination

Here is a stock you may also want to consider as our model shows that it has the right combination of elements to post an earnings beat.

lululemon athletica inc. (NASDAQ:LULU) has an Earnings ESP of +4.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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