FireEye (FEYE): What's In The Cards This Earnings Season?

FireEye Inc. (NASDAQ:FEYE) is set to report third-quarter 2016 results on Nov 3. Last quarter, the company posted a narrower-than-expected loss. Let’s see how things are shaping up for this announcement.

Factors at Play

FireEye, headquartered in Milpitas, CA, is a global provider of web, email, file and malware security to both enterprises and governments. Near-term prospects for the company are not very promising.

We have recently noticed that FireEye is losing business to its rivals. In spite of witnessing year-over-year revenue growth, the top line has missed the Zacks Consensus Estimate in each of the four trailing quarters. On the other hand, rivals such as Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Palo Alto Networks Inc. reported revenues that were not only higher on a year-over-year basis, but were also above the Zacks Consensus Estimate.

The company has failed to impress on the bottom-line front as well. Since Sep 2013, when it was listed on the NASDAQ Stock Exchange, the company has not been able to report profits for even a single quarter.

Nonetheless, FireEye’s management has been trying hard to turn the business around. During first-quarter 2016, the company acquired iSIGHT Partners to strengthen its current product line-up and offer an intelligence-led security model for enterprises of any size that other security providers will find difficult to match.

FireEye also acquired Invotas, a firm specializing in improving response times after attacks, during the quarter. Invotas’ lead product – Security Orchestrator – has been designed to compile information from a range of security products and automate responses when an incident occurs.

Furthermore, the company launched FireEye Essentials, a lower cost and simpler version of the FireEye Global Threat Management platform. It is targeting the smaller, mid-market companies with this new offering.

These moves are important as they indicate FireEye’s efforts toward moving past the enterprise-level end-point protection products it had started with. Also, these factors are likely to aid results in the to-be-reported quarter.

FIREEYE INC Price and EPS Surprise

FIREEYE INC Price and EPS Surprise | FIREEYE INC Quote

Earnings Whispers

Our proven model does not conclusively show that FireEye is likely to beat the Zacks Consensus Estimate in its upcoming release. 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, that is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for FireEye is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 68 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: FireEye has a Zacks Rank #3. Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #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 stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Stratasys Ltd. (NASDAQ:SSYS) , with an Earnings ESP of +41.67% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Asure Software Inc. (NASDAQ:ASUR) , with an Earnings ESP of +14.29% and a Zacks Rank #2.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>