NETGEAR (NTGR) Q1 Earnings In Focus: What's In The Cards?

NETGEAR (NASDAQ:NTGR) is slated to report first-quarter 2018 results on Apr 25. The company beat the Zack Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 10.18%.

Last quarter, the company reported earnings of 59 cents per share, which beat the Zacks Consensus Estimate of 54 cents but declined 22.4% year over year. Revenues of $397 million missed the consensus mark of $401 million but rose almost 7.9% from the year-ago quarter.

For first-quarter 2018, NETGEAR projects revenues between $330 million and $345 million. Non-GAAP operating margin is expected in the range of 6.5-7.5%.

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

Factors to Consider

NETGEAR’s strong product portfolio is a key growth driver. The company’s Arlo home security products and Orbi WiFI systems continue to boost its top line.

In the fourth quarter, the company rolled out new services across all three business segments, which are expected to drive results this quarter.

NETGEAR expanded its Nighthawk offerings by introducing Nighthawk Pro Gaming Router and Nighthawk Pro Gaming Switch in order to cater to the high-end gaming market. This is expected to boost its Connected Home segment. Moreover, the company partnered with Circle Media to bring Circle with Disney parental controls across the Nighthawk and Orbi WiFi routers and systems.

It remains to be seen whether the company’s newly launched subscription offerings, Insight Basic for $4.99 per month and Insight Premium for $9.99 per month, can benefit its SMB segment.

NETGEAR’s strengthening foothold in the North American market and improving penetration in the EMEA region is a positive.

However, the service provider business continues to pose challenges with the company streamlining the segment.

Also, expenses are on the rise due to the increase in headcount owing to the proposed separation of NETGEAR and its Arlo business, which remain an overhang on the bottom line.

Further, declining revenues in the APAC region is also a concern.

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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NETGEAR sports a Zacks Rank #1 but its Earnings ESP is 0.00%. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.

Stocks That Warrant a Look

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in their upcoming release:

Western Digital Corporation (NASDAQ:WDC) with an Earnings ESP of +2.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Advanced Micro Devices (NASDAQ:AMD) with an Earnings ESP of +1.19% and a Zacks Rank #3.

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