Bear Of The Day: F5 (FFIV)

F5 (FFIV) is a Zacks Rank #5 (Strong Sell) despite recently beating the Zacks Consensus Estimate. The stock has a Zacks Style Score for Value of F and a B for Growth.  This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.

Description                                             

F5, Inc. engages in the business of multi-cloud application services. The firm's products include F5 distributed cloud services, F5 NGINX, F5 BIG-IP, and F5 Systems. It operates through the following geographical segments: Americas, EMEA, and APAC. The company was founded on February 26, 1996 and is headquartered in Seattle, WA.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case F5 (FFIV)  I see the company has beaten the Zacks Consensus Estimate in each of the last four quarters. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

The most recent quarter saw the company report EPS of $4.39 when the consensus was calling for $3.96. 

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For F5 (FFIV) I see annual estimates for next year moving lower of late.

The current fiscal year consensus number has slid from $16.00 to $14.99 over the last 90 days. 

The next fiscal year has moved from $16.94 to $16.10 over the last 90 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

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This article originally published on Zacks Investment Research (zacks.com).

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