We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Fortinet (FTNT) Down 7.7% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for Fortinet (FTNT - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fortinet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Fortinet’s Q2 Earnings Top Estimates, Revenues Match
Fortinet Inc. delivered second-quarter 2022 non-GAAP earnings per share (EPS) of 24 cents, which beat the Zacks Consensus Estimate of 22 cents. The bottom line improved from the year-ago quarter’s earnings of 19 cents per share.
Total revenues of $1.03 billion matched the Zacks Consensus estimate while improving 28.6% year over year. The top line was driven by strong demand for the company’s FortiGate technology, which includes a security processing unit, an integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, and efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided Fortinet’s quarterly performance.
Quarter in Detail
Segment-wise, Product revenues jumped 34.3% year over year to $400.7 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution as well as strong revenues at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 25.2% to $629.4 million.
Billings were up 35.7% to $1.30 billion on solid execution and growth across all regions. Bookings surged 42.1% year over year to $1.38 billion, while the backlog was $349.9 at the close of the second quarter.
Geographically, the APAC region registered the highest top-line growth with a 42.3% increase, followed by the EMEA’s 28% and America’s 22.7%.
During the June-end quarter, the company secured 122 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth in terms of the number of deals worth more than $1 million in the quarter.
Margins
The non-GAAP gross margin contracted 100 basis points (bps) year over year to 76.5% in the second quarter of 2022. This reflects a contraction of 100 bps in the Services gross margin while an expansion of 20 bps in the Product gross margin.
Non-GAAP operating income jumped 25.6% to $255.4 million in the reported quarter, while non-GAAP operating margin shrunk 60 bps to 24.8%.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $1.73 billion, down from $2.11 billion reported at the end of first-quarter 2022.
During the April-June period, FTNT generated operating and free cash flow of $323.4 million and $283.5 million, respectively. During the first six months of 2022, the company generated operating cash flow of $719.5 million.
In July 2022, the company increased its share-repurchase authorization by $1 billion. During the reported quarter, the company bought back $800 million worth of shares. As of Aug 1, 2022, the company had approximately $1.03 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Fortinet issued impressive guidance for the third quarter and revised the same for the full-year 2022. For the third quarter of 2022, the company estimates revenues in the range of $1.105 billion to $1.135 billion. Billings are estimated to be $1.385-$1.415 billion.
Non-GAAP gross margin is expected in the range of 75% to 76%, while non-GAAP operating margin is anticipated between 25% and 26%. Non-GAAP EPS is projected at 26-28 cents.
For 2022, Fortinet still predicts revenues in the band of $4.350-$4.400 billion. However, billings are expected in the range of $5.560 billion to $5.640 billion now, compared with the earlier range of $5.500 billion to $5.580 billion.
Non-GAAP EPS is now anticipated between $1.01 and $1.06, down from the previous range of $5.00-$5.15.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 25-26%, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Fortinet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Fortinet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Fortinet is part of the Zacks Security industry. Over the past month, Check Point Software (CHKP - Free Report) , a stock from the same industry, has gained 0.7%. The company reported its results for the quarter ended June 2022 more than a month ago.
Check Point reported revenues of $571.1 million in the last reported quarter, representing a year-over-year change of +8.6%. EPS of $1.64 for the same period compares with $1.61 a year ago.
For the current quarter, Check Point is expected to post earnings of $1.67 per share, indicating a change of +1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Check Point has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Fortinet (FTNT) Down 7.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Fortinet (FTNT - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fortinet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Fortinet’s Q2 Earnings Top Estimates, Revenues Match
Fortinet Inc. delivered second-quarter 2022 non-GAAP earnings per share (EPS) of 24 cents, which beat the Zacks Consensus Estimate of 22 cents. The bottom line improved from the year-ago quarter’s earnings of 19 cents per share.
Total revenues of $1.03 billion matched the Zacks Consensus estimate while improving 28.6% year over year. The top line was driven by strong demand for the company’s FortiGate technology, which includes a security processing unit, an integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, and efforts to expand into the adjacent addressable markets and boost the firm’s global sales force aided Fortinet’s quarterly performance.
Quarter in Detail
Segment-wise, Product revenues jumped 34.3% year over year to $400.7 million. This upside can be attributed to the continued adoption of the FortiGate-based secure SD-WAN solution as well as strong revenues at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 25.2% to $629.4 million.
Billings were up 35.7% to $1.30 billion on solid execution and growth across all regions. Bookings surged 42.1% year over year to $1.38 billion, while the backlog was $349.9 at the close of the second quarter.
Geographically, the APAC region registered the highest top-line growth with a 42.3% increase, followed by the EMEA’s 28% and America’s 22.7%.
During the June-end quarter, the company secured 122 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth in terms of the number of deals worth more than $1 million in the quarter.
Margins
The non-GAAP gross margin contracted 100 basis points (bps) year over year to 76.5% in the second quarter of 2022. This reflects a contraction of 100 bps in the Services gross margin while an expansion of 20 bps in the Product gross margin.
Non-GAAP operating income jumped 25.6% to $255.4 million in the reported quarter, while non-GAAP operating margin shrunk 60 bps to 24.8%.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents and short-term investments of $1.73 billion, down from $2.11 billion reported at the end of first-quarter 2022.
During the April-June period, FTNT generated operating and free cash flow of $323.4 million and $283.5 million, respectively. During the first six months of 2022, the company generated operating cash flow of $719.5 million.
In July 2022, the company increased its share-repurchase authorization by $1 billion. During the reported quarter, the company bought back $800 million worth of shares. As of Aug 1, 2022, the company had approximately $1.03 billion left under the ongoing authorization, which is set to expire on Feb 28, 2023.
Guidance
Fortinet issued impressive guidance for the third quarter and revised the same for the full-year 2022. For the third quarter of 2022, the company estimates revenues in the range of $1.105 billion to $1.135 billion. Billings are estimated to be $1.385-$1.415 billion.
Non-GAAP gross margin is expected in the range of 75% to 76%, while non-GAAP operating margin is anticipated between 25% and 26%. Non-GAAP EPS is projected at 26-28 cents.
For 2022, Fortinet still predicts revenues in the band of $4.350-$4.400 billion. However, billings are expected in the range of $5.560 billion to $5.640 billion now, compared with the earlier range of $5.500 billion to $5.580 billion.
Non-GAAP EPS is now anticipated between $1.01 and $1.06, down from the previous range of $5.00-$5.15.
Non-GAAP gross margin and operating margin are now expected in the bands of 75-76% and 25-26%, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Fortinet has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Fortinet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Fortinet is part of the Zacks Security industry. Over the past month, Check Point Software (CHKP - Free Report) , a stock from the same industry, has gained 0.7%. The company reported its results for the quarter ended June 2022 more than a month ago.
Check Point reported revenues of $571.1 million in the last reported quarter, representing a year-over-year change of +8.6%. EPS of $1.64 for the same period compares with $1.61 a year ago.
For the current quarter, Check Point is expected to post earnings of $1.67 per share, indicating a change of +1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Check Point has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.