NetApp Earnings: Exceeds Profit Estimate

S&P 500 (NYSE:SPY) component NetApp Inc. (NASDAQ:NTAP) posted lower net income in the second quarter compared with a year-earlier period. NetApp supplies enterprise storage and data management software and hardware products and services.

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NetApp Inc. Earnings Cheat Sheet

Results: Net income for the computer-storage development fell to $109.6 million (30 cents per share) vs. $165.6 million (44 cents per share) a year earlier. This is a decline of 33.8% from the year-earlier quarter.

Revenue: Rose 2.3% to $1.54 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: NetApp Inc. reported adjusted net income of 51 cents per share. By that measure, the company beat the mean estimate of 33 cents per share. It fell short of the average revenue estimate of $1.68 billion.

Quoting Management: “NetApp produced healthy financial results in the second quarter with revenue roughly at the midpoint of and EPS above our guidance range, despite a difficult environment. We saw a strong uptake of NetApp Data ONTAP eight and clustered Data ONTAP, as customers are looking to build agile data infrastructure environments with intelligent data management, nearly unlimited scalability, and nondisruptive operations,” said Tom Georgens, president and CEO. “We also saw momentum in our partnering strategy with continued FlexPod growth and a record high revenue contribution from Arrow and Avnet. Our focus on delivering best-of-breed storage solutions and the leverage we gain through go-to-market and channel partners will enable NetApp to grow our business and gain share.”

Key Stats:

The company has now seen net income fall for four straight quarters. In the first quarter, net income fell 54.3% while the figure fell 7% in the fourth quarter of the last fiscal year and 30.7% in the third quarter of the last fiscal year.

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.3 percentage points from the year-earlier quarter to 59.3%. Over that time, margins have contracted on average 4.6 percentage points per quarter on a year-over-year basis.

The company topped expectations last quarter after falling short of forecasts in the first quarter with net income of 23 cents versus a mean estimate of net income of 25 cents per share.

Over the last five quarters, revenue has increased 12.5% on average year-over-year. The biggest increase came in the second quarter of the last fiscal year, when revenue rose 24.8% from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 41 cents a share to 38 cents over the last ninety days. The average estimate for the fiscal year is $1.45 per share, down from $1.52 ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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