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Can VMware Beat Its Earnings Estimate in Fiscal Q2 2019?

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Fiscal Q2 2019 EPS guidance and estimates

VMware (VMW) is set to release its fiscal Q2 2019 financial results on August 23 after the market closes. Analysts are estimating EPS to increase 13.2% YoY (year-over-year) to $1.49, which is the same as analysts’ estimate.

From the graph above, we can see VMware’s EPS growth in the last five quarters. During that period, VMware’s bottom line increased at a CAGR (compound annual growth rate) of 6.2%. Its EPS in fiscal Q1 2019 was $1.26, a 27.3% rise. In the trailing five quarters, the company has easily outpaced analysts’ estimates.

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Identifying EPS tailwinds

VMware continues to see strong EPS growth triggered by a higher adoption of the private, hybrid, and public cloud platforms. The increased digital transition trend across various businesses has further led to growth in the cloud licensing business. In addition, broader factors such as improving economic conditions are also encouraging higher IT spending across various industries.

The company has also formed a strategic alliance with the leading cloud service provider, Amazon’s (AMZN) AWS (Amazon Web Services). It can thus provide more flexibility to customers to easily access VMware’s vSphere-based private, public, and hybrid cloud environments in AWS from anywhere in the world.

However, rising maintenance costs and higher selling expenses continue to impact the company’s bottom line going forward.

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