Stifel Lowers Estimates on NetApp (NTAP) Post Q2

Stifel analyst, Aaron Rakers, published an earnings review of NetApp (NASDAQ: NTAP) quarter. Results were mixed and the analyst notes that people will be looking for the 10Q filing which provides more detail on the deferred revenue breakdown.

NetApp reported F2Q16 EPS of $0.61/sh. vs. street conseneus of $0.57 and guidance of $0.55-$0.60. Revenue of $1.445B was in line with guidance of $1.4-$1.5B. Maintenance / Support revenue at $326M reflects a sharp y/y growth deceleration; but that sequential decline at 5.8% needs to be adjust for ~$23M impact from 14-week F1Q16.

NetApp has slightly tempered its F2016 outlook – now estimating revenue to decline just over 5% y/y vs. prior -5% y/y. Non-GAAP GM% expected to be down 1-2pp y/y (vs. prior -1pp guide); EBIT margin is expected to be -2pp y/y (in-line w/ prior guide; ~18% for 2HF2016 vs. prior 18%-20% range). However this negative may be offset by upcoming significant opex realignment efforts

NetApp saw a 23% y/y increase in total capacity shipped during F2Q16, an acceleration from the +1% y/y growth reported in F1Q16, and inline with the average of +23% over the four quarter previous to that.

OEM revenue accounted ~6% of total revenue; implying a 27% y/y decline. This would leave them to estimate Branded product-only revenue down 10% y/y and roughly in-line with the decline of product revenue of -12% y/y; decelerating from the 26% y/y decline seen in the prior quarter.

Total deferred revenue was flat y/y relative to the adjusted +1% y/y in the prior quarter. The analyst notes that investors will be watching for the 10-Q filing, which provides further breakdown of NetApp’s deferred revenue – Software Entitlement & Maintenance + Service deferred revenue at $3.04B exiting F1Q16 (+1% y/y normalized).

The firm cut FY 2016 EPS from $2.42 to $2.37 and FY 2017 EPS from $2.87 to $2.70.

No change to the Hold rating.

For an analyst ratings summary and ratings history on NetApp click here. For more ratings news on NetApp click here.

Shares of NetApp closed at $31.04 yesterday.

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