CTXS Citrix Systems Inc

Citrix Systems Inc (CTXS) reported blockbuster first quarter 2011 financial results, where both earning per share (EPS) and revenue comprehensively beat the Zacks Consensus Estimate. Global trends toward virtualization and cloud computing facilitated the company’s impressive results.

First Quarter Highlights

First quarter 2011 total revenue was $490.9 million, up 18% year over year and was well above the Zacks Consensus Estimate of $475 million.

GAAP net income was $73.5 million or 38 cents per share compared with a net income of $47.3 million or 25 cents per share in the prior-year quarter. Quarterly adjusted EPS of 41 cents handily beat the Zacks Consensus Estimate of 32 cents.

Gross margin in the first quarter of 2011 was 88.3% compared with 88.2% in the year-ago quarter. Operating expenses in the reported quarter were around $352.6 million compared with $313.5 million in the prior-year quarter. Operating margin was 16.5% compared with 12.6% in the prior-year quarter.

Agreements of Analysts

Of the 12 analysts covering the stock in the last 7 days, none revised their estimates upward or downward for the second quarter as well as for the next quarter of 2011.

For fiscal 2011, out of the 12 analysts, none increased or decreased their estimates. However, for 2012, out of the 12 analysts, 1 revised its estimate upward, while none moved in the opposite direction.

Currently, the Zacks Consensus EPS Estimate for the second quarter of 2011 is pegged at 46 cents. The projected annual growth rate is 48.39%. Similarly, for the third quarter, the current Zacks Consensus EPS Estimate of 52 cents reflects a year-over-year growth of 13.04%.

Magnitude of Estimate Revisions

For the second quarter 2011, during the last 7 days, the Zacks Consensus Estimate was in line with the current estimate of 46 cents. Likewise, for the third quarter of 2011, the Zacks Consensus Estimate was in line with the current estimate of 52 cents. For 2011, the Zacks Consensus Estimate dipped by a penny from $2.07 to $2.06, in the last 7 days. Similarly, for 2012, the Zacks Consensus Estimate inched up by a penny from $2.36 to $2.37.

Earning Surprises

With respect to earnings surprises, the company notched up an average earnings surprise of 14.43% in the trailing four quarters, implying that the company has exceeded the Zacks Consensus Estimate by the same magnitude over the last three quarters. The ongoing quarter and the upcoming quarter contain upside potentials of (essentially a proxy for future earnings surprises) 0.00% and 0.00% respectively. Likewise, for fiscal 2011 and fiscal 2012, Zacks Consensus Estimates upside potentials are 0.00% and 0.00%, respectively.

Our Recommendation

Strong financial outlook coupled with increasing trend for globalization and increased share repurchase plan will drive the stock going forward. We believe that the virtualization market will continue to flourish with desktop virtualization as its core theme. This will sustain future growth of both Citrix and its major competitor VMware Inc. (VMW).

We, thus, maintain our long-term Outperform recommendation forCitrix Systems. Currently, Citrix Systems has a Zacks #1 Rank, implying a short-term Strong Buy rating on the stock.

 
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