Will It be another Quarter of Positive Earnings Surprise for VMWare, Inc. (VMW)?


vmware

VMWare, Inc. (NYSE:VMW) is scheduled to disclose its financial results for the December quarter on Tuesday after the market session is over. The company will also be holding a conference call the same day at 5 p.m. ET.

The company is engaged in cloud computing. Therefore, VMWare, Inc. (NYSE:VMW) was poised to benefit from the available opportunities in hte fast growth segment. There was also no doubt that the sector is slowly becoming a crowded one though there was enough space for everyone to grow as the industry is not yet tapped completely. However, more players meant pricing competition and that is something investors will keep an eye on.

Factors To Ponder

There are few positive factors to ponder over. For instance, the company remained one of the established brands in cloud computing and virtualization market. The company has tactical alliance with Hewlett-Packard Company (NYSE:HPQ) providing opportunity to win contracts. Aside from the innovative product pipeline, the company’s global presence also helps to fuel overall results.

Moreover, VMWare Inc, Inc. (NYSE:VMW)’s acquisitions of AirWatch, Cloud Volumes, and Desktone have provided rooms to expand the company’s product portfolio. However, the concern seems to be the sluggish IT spending. The company’s move to invest in product innovations, acquisitions, and investment in emerging markets could weigh on its margins in the near-term.

Earnings Expectations

On average, Street analysts’ expect the company to report nearly 6% growth in earnings for revenue growth of 14.2% in the fourth quarter. This meant that the company would earn $1.07 a share on revenues of $1.69 billion. In comparison, the company earned $1.01 a share on revenues of $1.48 billion in the preceding year’s fourth quarter.

Significantly, the company’s EPS has beaten the consensus in the last four quarters between 1% and 4.8%. The key factor was that every time the surprising percentage improved. Therefore, with the growth witnessed in the cloud computing market, the company was also a likely beneficiary of the opportunities.

Recently, Citigroup Inc (NYSE:C) initiated coverage on VMWare, Inc. (NYSE:VMW) with a rating of Buy and kept a price objective of $104. The brokerage expects mid-point of above 10% as guidance would be comfortable.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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