Zscaler (ZS) to Report Q4 Earnings: What's in the Offing?

Zscaler ZS is slated to report fourth-quarter fiscal 2022 results on Sep 8.

For the fourth quarter, Zscaler projects total revenues between $304 million and $306 million, suggesting year-over-year growth of 54 to 55%. The Zacks Consensus Estimate for the same is pegged at $305.6 million, suggesting growth of 55.1% from the year-ago quarter.

Zscaler anticipates non-GAAP earnings of 20 to 21 cents per share. The Zacks Consensus Estimate for the same stands at 20 cents per share, indicating a year-over-year decline of 42.9%.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 36.2%.

Let’s see how things have shaped up for the upcoming announcement.

Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote

Factors to Note Ahead of Q4 Results

Zscaler’s fourth-quarter results are likely to reflect the continued solid demand for its security and networking products, given the healthy environment of the global security market. The solid adoption of its in-cloud security platform, Zscaler’s Zero Trust Exchange, due to the ongoing digital transformation across enterprises is likely to have acted as a key catalyst.

With hybrid work being the new normal, an increasing number of people have been logging into employers' networks through off-premises locations, which has triggered the need for greater security. This trend is anticipated to have spurred demand for Zscaler’s products in the quarter under review.

Zscaler’s existing core products, especially the ZIA (“Zscaler Internet Access”) and the ZPA (“Zscaler Private Access”), have been driving strong customer retention. The addition of new capabilities to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for Software-as-a-service applications, is likely to have driven its product portfolio expansion and aided customer acquisition.

The increased adoption of Software-Defined Wide Area Network (“SD-WAN”) solutions might have acted as a key growth driver in the quarter to be reported. Per the latest Market Reports World report, the market size for SD-WAN solutions is likely to reach $5.22 billion by 2028 from $995.2 million in 2021, witnessing a CAGR of 26.2% during the forecast period of 2022 to 2028.

As there are only a few vendors that offer security and SD-WAN solutions, ZS has been capitalizing on the increasing opportunities in the market. The company’s collaboration with both VMware and Silver Peak has been helping it secure SD-WAN deployments. This is likely to have positively impacted Zscaler’s fiscal fourth-quarter performance.

However, increased investments to enhance sales and marketing (S&M) capabilities and higher research and development (R&D) expenses may have weighed on the company’s to-be-reported quarter’s bottom line.

The company witnessed a year-over-year increase of 71.1% in non-GAAP S&M and 74.1% in non-GAAP R&D expenses in the third quarter. Non-GAAP operating expenses climbed 70.5% year over year in the last reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

Zscaler currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, The Kroger Company KR, Dave & Buster's Entertainment PLAY and MasterCraft Boat MCFT have the right combination of elements to post an earnings beat in their upcoming releases.

Kroger carries a Zacks Rank #2 and has an Earnings ESP of +4.42%. The company is slated to report second-quarter fiscal 2023 results on Sep 9. Kroger’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 20.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for KR’s fiscal second-quarter earnings is pegged at 81 cents per share, indicating a year-over-year increase of 1.3%. The consensus mark for revenues stands at $34.4 billion, suggesting a year-over-year increase of 8.6%.

Dave & Buster's Entertainment will report second-quarter fiscal 2023 results on Sep 7. The company carries a Zacks Rank #3 and has an Earnings ESP of +2.97% at present. Dave & Buster's Entertainment’s earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 41.1%.

The Zacks Consensus Estimate for quarterly earnings is pegged at $1.01 per share, suggesting a year-over-year decline of 5.6%. PLAY’s quarterly revenues are estimated to increase 14.5% year over year to $432.3 million.

MasterCraft currently carries a Zacks Rank #3 and has an Earnings ESP of +1.74%. The company is slated to report its fourth-quarter fiscal 2022 results on Sep 8. MasterCraft’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 17.4%.

The Zacks Consensus Estimate for MasterCraft’s fourth-quarter earnings stands at $1.49 per share, implying a year-over-year increase of 52%. MCFT is estimated to report revenues of $195.1 million, which suggests an increase of 25.5% from the year-ago quarter.

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