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Here's What to Expect from VMware's (VMW) Q3 Earnings

Shares of VMware, Inc. VMW jumped nearly 5% during regular trading Wednesday. So, should investors expect the business-focused cloud computing firm to post strong Q3 financial results Thursday, or did VMW stock get a boost from its peer Salesforce’s CRM strong quarterly performance?

Cloud-based customer relationship management power Salesforce saw its stock price soar over 10% Wednesday after it reported its Q3 earnings results after the closing bell Tuesday. The company’s earnings blew away our Zacks Consensus Estimate and its sales climbed 26% from the year-ago quarter.

Meanwhile, VMware has seen its stock price surge over 17% in the last month as the broader market moved mostly sideways. Shares of VMware closed regular trading Wednesday at $159.76 per share, which marked a roughly 3% decline from its 52-week high $165.00 per share.

Jumping back a bit further, we can see that shares of VMW have outpaced its industry over the past two years. Plus, VMware stock has topped its peer group over this stretch, which includes the likes of Adobe ADBE and Oracle ORCL.



VMware’s Q3 revenues are projected to climb 9.7% to reach $2.17 billion, based on our current Zacks Consensus Estimate. The Palo Alto-based tech company’s adjusted quarterly earnings are expected to jump 11.9% to $1.50 per share. Yet, we still need to know how likely it is that VMware can top our quarterly earnings estimates.

Luckily, we can turn to our exclusive Earnings ESP figure to help us. The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

VMware is currently a Zacks Rank #3 (Hold) that sports an Earnings ESP of 0.00%. This, unfortunately, means that our model is inconclusive. Yet, investors should note that the company has topped our quarterly earnings estimates in the trailing four periods.

VMware is set to release its third quarter financial results after the market closes on Thursday.

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