Will Investments Affect Box Inc. (BOX) In Q1 Earnings?

Box, Inc. (NYSE:BOX) is set to report first-quarter fiscal 2017 results on Jun 1. Last quarter, the company posted in-line results.

Let’s see how things are shaping up for this announcement.

Factors at Play

The company incurred fiscal fourth-quarter loss of 41 cents as expected. However, revenues of $85.0 million were up 36.0% year over year driven by strong growth in billings.

Also, the company reported a non-GAAP operating loss of $31.1 million versus operating loss of $32.2 million in the year-ago quarter.

Box is a cloud-storage company which went public in 2015. The company has been consistently investing in security, compliance and administrative technology, and plans to hire more sales personnel. These investments position Box favorably to gain from the increasing adoption of cloud computing technologies across enterprises and the need for secure collaboration over the long term.

Moreover, the company’s strategic partnerships and expanding cross-selling opportunities positions it well for both continued growth. However, continuous investment in research and development activities could take a toll on the company’s margins and profits in the to-be-reported quarter.

For the first quarter of fiscal 2017, the company expects to report revenues in the range of $88–$89 million and non-GAAP loss per share of 24 cents to 23 cents.

Earnings Whispers

Our proven model does not conclusively show that Box will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 39 cents. Hence, the difference is 0.00%.

Zacks Rank: Box has a Zacks Rank #3, which increases the predictive power of ESP. But a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

The Bank of Nova Scotia (TO:BNS) , with an Earnings ESP of +5.50% and a Zacks Rank #2. The company is slated to report second-quarter fiscal 2016 earnings results on May 31.

Vail Resorts Inc. (NYSE:MTN) , with an Earnings ESP of +0.71% and a Zacks Rank #2. The company is slated to report third-quarter fiscal 2016 earnings results on June 9.

Southern Copper Corp. (NYSE:SCCO) , with an Earnings ESP of +33.33% and a Zacks Rank #1. The company is slated to report second-quarter 2016 earnings results on Jul 27.