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Check Point Software Technologies Ltd.(CHKP - Analyst Report) reported fourth quarter 2012 with adjusted earnings of 85 cents per share beating the Zacks Consensus Estimate of 83 cents.

Revenue

Check Point reported revenues of $368.6 million in the fourth quarter, up 3.3% from $356.8 million in the year-ago period and within the company’s guidance range of $355.0–$387.0 million. The year-over-year revenue growth was aided by the increase in Software Updates, Maintenance and Services revenues, partially offset by lower Product and Licenses revenue.

Geographic contributions also remained stable with Americas contributing 45% of revenues; Europe 37%; and Asia-Pacific and Japan, Middle East and Africa region contributing the remaining 18%.

Operating Results

Reported gross profit increased 5.9% year over year to $324.1 million. Gross margin increased 210 basis points from the year-ago quarter to 87.9%. Cost control measures primarily led to the margin expansion.

Operating income came in at $210.5 million, up 9.3% year over year. Operating margin increased 311 basis points year over year to 57.1%. Total operating expenses increased 0.2% year over year as the company continued to invest in business and hiring for research and development, sales and marketing and technological support.

Reported net income was $173.9 million or 85 cents per share, up from $159.8 million or 75 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $173.9 million or 85 cents a share compared with $160.7 million or 79 cents in the year-earlier quarter.

Balance Sheet & Cash Flow

Check Point exited the quarter with cash, cash equivalents and marketable securities of approximately $1.50 billion, up from $1.45 billion in the prior quarter. Trade receivables were $373.8 million. Cash flow from operations was $202.5 million, up from $180.4 million in the previous quarter.

First Quarter Outlook

Management forecasts first quarter2013 revenue in a range of in the range of $320 million to $332 million, while the non-GAAP earnings per share in the range of 74 to 80 cents per share. GAAP earnings per share are expected to be approximately 6 cents less than the estimated range.

For 2013, the company expects revenue in the range of $1.4 billion to $1.45 billion while the non-GAAP earnings per share in the range of $3.30 to $3.50. Moreover, the GAAP EPS is expected to be approximately $0.26 less than that.

Our Take

Check Point delivered good fourth quarter results with the bottom line exceeding the Zacks Consensus Estimate. Results were also decent in terms of year-over-year comps. The company delivered a decent operating performance with a modest revenue growth and a maximum revenue contribution from America. Results are affected to a certain extent by the slowdown in growth in the European region and spending by the company as well as fresh competition from Palo Alto Networks Inc. (PANW - Snapshot Report) in the new target markets of Check Point.

The company is also deriving some benefits from strength at the high end of the market and increased demand for its blade solutions. We think that Check Point offers a good investment opportunity in comparison to Cisco Systems Inc. (CSCO - Analyst Report) and Juniper Networks Inc. (JNPR - Analyst Report).

Currently, Check Point has a Zacks Rank #3 (Hold).

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