What's In The Cards For Splunk (SPLK) In Q2 Earnings?

Splunk Inc. (NASDAQ:SPLK) is scheduled to release second-quarter fiscal 2017 results on Aug 25. Splunk posted a negative surprise of 16.31% in the last quarter. The company has posted an average negative surprise of 7.46% over the trailing four quarters. Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider

Splunk has been strengthening its product pipeline to benefit from the growing data and analytics market. Over the past few years, the cloud and data analytics market has seen strong growth especially in the enterprise domain, which is a positive for the company.

However, due to the ongoing transition, license bookings business will start to slow down. Also, the company has been seeing an increase in the numbers of customers. In the last reported quarter, it added 450 customers.

However, increasing investments in research and development, coupled with higher operating costs, are anticipated to be a near-term drag on profitability. As Splunk continues to explore and expand into new markets, sales and marketing expenditures are also predicted to rise significantly, thereby hurting margins in the near term.

Also, growing competition from established players such as International Business Machines (NYSE:IBM) , SAP, Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) , all of which are vying to get a bigger share of the market, is a concern.

For the second quarter, Splunk expects revenues in the range of $198 million and $200 million and non-GAAP operating margin in the range of 2% to 3%.

Earnings Whispers

Our proven model does not conclusively show that Splunk 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. That is not the case here as you will see below

Zacks ESP: Its Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 59 cents.

Zacks Rank: Splunk carries a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

SPLUNK INC Price and EPS Surprise

Stocks to Consider

Here is a stock you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Dollar Tree, Inc. (NASDAQ:DLTR) with an Earnings ESP of + 4.11% and a Zacks Rank #2.