F5 Networks (Nasdaq: FFIV) has seen its share price largely trade flat since the end of 2010. If you look at just the last five years, the picture gets even worse with its share price down 14%.

Yet, the company is set to announce its fiscal fourth-quarter earnings on Tuesday, October 24th shortly after the market closes. Let’s take a look at what Wall Street expects and what F5 Networks needs for a rebound in its share price.

Expectations for Fourth Quarter Earnings from F5 Networks

When F5 reports tomorrow, Wall Street is expecting the following:

• Revenue: $702.25 million
• Net Income (Non-GAAP): $191.35
• Net Income (GAAP): $119.4
• Normalized EPS: $3.21

If that normalized EPS figure looks familiar, it’s because F5 Networks reported a normalized EPS of $3.21 last quarter as well.

Looking ahead to the future, estimates are lower for the next quarter. For the Fiscal First Quarter (ending in December 2023), analysts project:

• Revenue: $697 million
• Net Income (Non-GAAP): $183.80
• Net Income (GAAP): $121.38
• Normalized EPS: $3.04

Long-Term Projections for F5 Networks

There isn’t much growth baked into the share price for F5 Networks. It’s expected that they’ll record $2.808 billion in revenue when fiscal 2023 results are reported tomorrow. In the future, revenue growth isn’t projected to pick up much:

• $2.833 billion in Fiscal 2024
• $2.957 billion in Fiscal 2025
• $3.019 billion in Fiscal 2026
• $3.127 billion in Fiscal 2027

How FFIV Stock Can Start Delivering

If you’re looking at these numbers and wondering what the rationale for owning F5 stock is, the short answer is the potential for profit growth. While those top-line numbers are flat, Wall Street is more optimistic on profit margins. In the coming years, they project:

• $11.42 per share of normalized EPS in 2023
• $12.59 per share of normalized EPS in 2024
• $13.73 per share of normalized EPS in 2025
• $16.29 per share of normalized EPS in 2026
• $18.85 per share of normalized EPS in 2027

The only way to do this would be by cutting operating expenses. Recent history hasn’t been encouraging on this front.

Since fiscal 2019 F5 Networks has increased sales by$564 million. However, cost of goods sold have gone up $243 million while operating expenses (SG&A and R&D) have increased by $372 million.

The result? Profits have decreased during that time. On the plus side, if F5 was able to deliver on its 2025 profit projections, it would be trading for about 10 times normalized earnings.

If F5 Networks’ stock is going to break out of its decade in the wilderness, it’ll need more efficient cost-cutting than it has seen in recent years and just a dash of revenue growth to go along with it.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.