Earnings Preview: Citrix Systems

Citrix Systems (CTXS) is expected to report Q3 earnings Wednesday after the close, with a conference call scheduled for 4:45 pm ET.

Guidance

The consensus estimate is 37c for EPS and $391.54M for revenue, according to First Call. On August 28, the company revised its Q3 and FY08 forecast, guiding to Q3 EPS of 36c to 39c and FY08 EPS of $1.54 to $1.60.

Analyst Views

RBC Capital expects Citrix to report in-line Q3 revenue/EPS and soft deferred revenue with conservative forward guidance. Despite 2009 revenue and EPS estimates being reduced on average of $38M and 6c, RBC Capital believes the consensus numbers need to come down further, though it thinks it is already priced into shares.

Kaufman's Q3 revenue and EPS estimates of 35c and $382M are the low on the Street and below the consensus average. The firm estimates product license revenue to decline 3% YoY. Within this segment, Kaufman forecasts XenApp to decline 5% YoY and account for 22% of total revenue. They also expect $6M from XenSource, and modeling Online Services to grow 20% YoY to $67M. Kaufman's gross margin expectation is 89.6%, which is a 130 bps sequential improvement and in line with the company's historic gross margins. The slight expansion should be due to improvement in XenSource and NetScaler, which carry a lower gross margin than XenAppr. Overall, Kaufman remains positive on Citrix, due to its history of execution, broad product line and ability to provide significant customer value. The firm rates Citrix a Buy.