NetApp Meets Earnings, but Guidance Falls Short

The company gave guidance for the third quarter as $0.74 to $0.79 in earnings per share and net revenues in the range of $1.56 billion to $1.66 billion. The consensus estimates for the third quarter are $0.80 in earnings per share and $1.62 billion in revenue.

Net income for the second quarter was $226 million, compared to $232 million in the same period of the previous year. NetApp ended this quarter with $5.27 billion of total cash, cash equivalents and investments.

This quarter roughly $652 million was returned to shareholders in terms of share repurchases and cash dividends. The next dividend will be paid in the amount of $0.165 per share on January 22, 2015.

During this quarter, NetApp was awarded Best of Show Most Innovative Flash Memory Customer Implementation for its EF-Series all-flash-array deployment at Diamond Light Source. The company was also selected by IT pros in the annual SSD survey as the Market Leader favorite for all-flash NAS SSD.

Maxim started NetApp with a Buy rating and a $55 price target, which was an unusual call in the morning because it came right ahead of earnings on the same day. Standpoint Research downgraded NetApp from a Buy rating to Hold on November 4.

Shares of NetApp closed Wednesday barely up about 0.1% at $42.31. Following the release of the earnings report, the initial response in the post market was negative and shares were down over 3% at $40.70. Speculatively, shares were down on lower-than-expected guidance for third quarter earnings.

The stock has a consensus analyst price target of $42.81 and a 52-week trading range of $33.34 to $45.96. NetApp has a market cap of $13 billion.

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Tom Georgens, chairman and CEO, said:

We are pleased with our performance in the second quarter with revenue and non-GAAP EPS coming in above the mid-point of our guidance range. We have dramatically expanded the NetApp portfolio at an unprecedented pace. Our best of breed solutions not only solve the challenges enterprises face today, but ensure a seamless path to the hybrid cloud that enables customers to effectively manage their data across multiple cloud resources.