On The Fly: What to watch for in NetApp’s earnings report

NetApp (NTAP) is scheduled to report results of its fiscal second quarter after the market close on Wednesday, November 15, with a conference call scheduled for 5:30 pm ET. What to watch for: 1. EPS, REVENUE CONSENSUS SLIGHTLY CHANGED: Along with its last report, NetApp guided for Q2 earnings per share in the range of 64c-72c on revenue $1.31B-$1.46B. At the time, analysts expected the company to report Q2 EPS of 70c on revenue of $1.37B, but those figures have since changed slightly to 69c and $1.38B, respectively. Following the last earnings report, Deutsche Bank analyst Sherri Scribner said that “some investors were expecting more” than the Q2 guidance NetApp provided. 2. AZURE PARTNERSHIP: In early December, NetApp introduced the Network File System service in the cloud, which is delivered natively in Microsoft’s (MSFT) Azure and powered by NetApp. NetApp also announced deeper integrations with Azure in Cloud Control for Microsoft Office 365 and NetApp AltaVault. NetApp said at the time that with these new services cloud architects and storage administrators will be able to provision, automate, and scale NFS services by using RESTful APIs. Additional data protection services will be offered, starting with on-demand, automated snapshots. The service will support both V3 and V4 workloads to customers operating in the cloud and the hybrid cloud. It will also integrate with a host of Azure services, including analytics, SQL Server, and SAP Hana for Azure, the company said. 3. DAVIDSON, RBC POSITIVE: Yesterday, DA Davidson analyst Mark Kelleher raised his price target on NetApp to $53 from $51 and maintained his Buy rating ahead of the company’s earnings report. Kelleher said that the company has “rejuvenated” a product line that spans many new markets, including Cloud and Flash, while also demonstrating a commitment to its stock buyback program. The analyst said he expects Q2 results to show continued strong sales of flash-based systems as the company takes market share from Dell/EMC and Hewlett-Packard Enterprise (HPE). Meanwhile, RBC Capital analyst Amit Daryanani recently raised his own price target on NetApp to $50 ahead of the company’s Q2 results, saying that an improved IT macro backdrop and federal tailwinds could generate an upside print relative to consensus estimates.