Some new tech trends, like artificial intelligence and autonomous driving, promise massive growth in the future. Others, like cyber security, are in demand right now. Nevertheless, not every cyber security firm has been witnessed consistent success. Today’s “Bear of the Day” is one of the struggling stocks in this industry, Symantec Corporation .
Symantec is one of the world’s largest cyber security firms. The company’s Norton brand is a major player on the consumer security side of things, while its enterprise offerings are used by a number of businesses around the world.
A few months ago, Symantec shares plummeted after the company reported dismal results and lowered its outlook. Now, as we approach Symantec’s fiscal third quarter earnings report date, the stock is once again looking risky. The stock is currently holding a Zacks Rank #5 (Strong Sell).
Latest Earnings and Outlook
Symantec reported its second-quarter fiscal 2018 earnings on Nov. 1. On a non-GAAP basis, the company generated revenues of $1.276 billion, up 26% year-over-year but below our consensus estimate of $1.278 billion. Meanwhile, non-GAAP earnings of 40 cents per share missed our consensus estimate by three cents.
The company noted that its booking mix is shifting faster than expected toward more “ratable revenue recognition,” which resulted in lower-than-expected revenue growth. Considering this effect, Symantec now expects non-GAAP revenues in the range of $1.250 - $1.280 billion. Further, management predicts earnings between 42 cents and 46 cents for the third quarter.
Analysts have put their projections right in the middle of these ranges. Our current consensus estimates are calling for the company to report earnings of 44 cents per share and revenues of $1.26 billion. These results would represent year-over-year growth of 37.5% and 21.5%, respectively. Those growth rates may seem exciting, but considering the company’s recent acquisition activity, this expansion—particularly on the revenue side—is likely to disappoint many investors.
Key Metrics
Despite a slump that has seen the stock lose about 17% over the past 12 weeks, Symantec shares are still trading at 25x earnings and nearly 4x sales. These figures are not horrible for a tech company, but considering that you are not exactly buying in at a moment of strength, we can hardly consider the company a great value option.
Meanwhile, we have seen analyst sentiment cool even further as we approach the company’s earnings report date. One way to gauge this is looking at the Zacks Earnings ESP figure. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
Right now, SYMC has an Earnings ESP of -1.38%. This means that the most recent estimates are below the consensus estimate. That type of analyst activity in the days closest to the report is not a good sign.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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Some new tech trends, like artificial intelligence and autonomous driving, promise massive growth in the future. Others, like cyber security, are in demand right now. Nevertheless, not every cyber security firm has been witnessed consistent success. Today’s “Bear of the Day” is one of the struggling stocks in this industry, Symantec Corporation .
Symantec is one of the world’s largest cyber security firms. The company’s Norton brand is a major player on the consumer security side of things, while its enterprise offerings are used by a number of businesses around the world.
A few months ago, Symantec shares plummeted after the company reported dismal results and lowered its outlook. Now, as we approach Symantec’s fiscal third quarter earnings report date, the stock is once again looking risky. The stock is currently holding a Zacks Rank #5 (Strong Sell).
Latest Earnings and Outlook
Symantec reported its second-quarter fiscal 2018 earnings on Nov. 1. On a non-GAAP basis, the company generated revenues of $1.276 billion, up 26% year-over-year but below our consensus estimate of $1.278 billion. Meanwhile, non-GAAP earnings of 40 cents per share missed our consensus estimate by three cents.
The company noted that its booking mix is shifting faster than expected toward more “ratable revenue recognition,” which resulted in lower-than-expected revenue growth. Considering this effect, Symantec now expects non-GAAP revenues in the range of $1.250 - $1.280 billion. Further, management predicts earnings between 42 cents and 46 cents for the third quarter.
Analysts have put their projections right in the middle of these ranges. Our current consensus estimates are calling for the company to report earnings of 44 cents per share and revenues of $1.26 billion. These results would represent year-over-year growth of 37.5% and 21.5%, respectively. Those growth rates may seem exciting, but considering the company’s recent acquisition activity, this expansion—particularly on the revenue side—is likely to disappoint many investors.
Key Metrics
Despite a slump that has seen the stock lose about 17% over the past 12 weeks, Symantec shares are still trading at 25x earnings and nearly 4x sales. These figures are not horrible for a tech company, but considering that you are not exactly buying in at a moment of strength, we can hardly consider the company a great value option.
Meanwhile, we have seen analyst sentiment cool even further as we approach the company’s earnings report date. One way to gauge this is looking at the Zacks Earnings ESP figure. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
Right now, SYMC has an Earnings ESP of -1.38%. This means that the most recent estimates are below the consensus estimate. That type of analyst activity in the days closest to the report is not a good sign.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>