Atlassian (TEAM) To Report Q3 Earnings: What's In The Cards?

Atlassian Corporation Plc (NASDAQ:TEAM) is scheduled to report third-quarter fiscal 2018 earnings on Apr 19. The question lingering on investors’ minds is if this company, engaged in designing, developing, licensing and maintenance of software, and provisioning of software hosting services, is capable of delivering a positive surprise or not.

Notably, the stock outperformed the Zacks Consensus Estimate in all the trailing four quarters, with an average positive surprise of 21.87%. Last quarter, the company came up with a positive earnings surprise of 8.3%.

What the Zacks 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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Atlassian has a Zacks Rank #3 and an Earnings ESP of 0.00%. This indicates that the company is unlikely to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the third quarter is pegged at 8 cents per share, flat on a year-over-year basis. Revenues are estimated to be around $218.24 million, indicating a 36.5% increase on a year-over-year basis.

Factors Driving Results

The company’s continuous client wins on the back of a diverse product portfolio is a positive. Notably, its client base reached 89,000 by the end of fiscal 2017. The inorganic additions have enriched the company’s portfolio aided the top line.

The company’s acquisition of Trello is worth a mention. Trello assisted Atlassian in dealing with clients across business teams in legal, human resource, finance, marketing and sales. The client base also increased by 13,000 paid customers on a net basis.

However, surging expenses continue to be a drag on its margins and the bottom line. Notably, the company has opened a new office in Bengaluru, India. The company’s increasing investments on research and development, and go-to-market sales strategy are expected to hurt margins going ahead.

Key Picks

Here are some stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Applied Materials, Inc. (NASDAQ:AMAT) , with an Earnings ESP of +0.56% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software, Inc. (NYSE:PAYC) , with an Earnings ESP of +0.33%, and a Zacks Rank #1.

Western Digital Corporation (NASDAQ:WDC) , with an Earnings ESP of +2.20% and a Zacks Rank #1.

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