CTXS Citrix Systems Inc

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

Second Quarter Highlights

Total revenue in the second quarter of 2011 was $530.8 million, up 16% year over year and beat the Zacks Consensus Estimate of $522 million. GAAP net income was $82 million or 43 cents per share compared with a net income of $47.6 million or 25 cents per share in the prior-year quarter. However, quarterly adjusted EPS of 49 cents was well above the Zacks Consensus Estimate of 46 cents.

Gross margin in the second quarter of 2011 was 87% compared with 88.3% in the year-ago quarter. Operating expenses in the reported quarter were roughly $366.3 million compared with $331.1 million in the prior-year quarter. However, quarterly operating margin was 18% compared with 16.1% in the prior-year quarter.

Agreements of Analysts

Of the 14 analysts covering the stock in the last 7 days, none revised their estimates for the third quarter as well as for the next quarter of 2011.

For fiscal 2011, out of the 14 analysts, none increased or decreased their estimates. Likewise, for 2012, none of the 13 analysts revised their estimates.

Currently, the Zacks Consensus EPS Estimate for the third quarter of 2011 is pegged at 47 cents with a projected annual growth of 3.11%. Similarly, for the fourth quarter, the Zacks Consensus EPS Estimate of 65 cents reflects a year-over-year growth of 18.44%.

Magnitude of Estimate Revisions

For the third and fourth quarters of 2011, the Zacks Consensus Estimates were in line with the current estimates of 47 and 65 cents, respectively, over the last 7 days. For fiscal 2011 and 2012, the Zacks Consensus Estimates were in line with the current estimates of $2.03 and $2.37, respectively.

Earning Surprises

With respect to earnings surprises, the company notched up an average earnings surprise of 17.57% in the trailing four quarters, implying that the company exceeded the Zacks Consensus Estimate by the same magnitude over the last four quarters.

The ongoing quarter and the fourth quarter contain upside potential of (essentially a proxy for future earnings surprises) 0.00% and 0.00% respectively. Likewise, fiscal 2011 reflects a growth potential of 0.00%. However, fiscal 2012, contains a downside potential of 0.42%.

Our Recommendation

A strong financial outlook coupled with increasing globalization and increased share repurchase plan will likely 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 the future growth of both Citrix and its major competitor VMware Inc. (VMW). However, the recent global meltdown may act as a strong headwind for Citrix as more and more companies will try to postpone their near-term expenditure.

We, thus, maintain our long-term Neutral recommendation for Citrix Systems. Currently, Citrix Systems has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

 
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