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Factors You Must Note Ahead of Verisign's (VRSN) Q3 Earnings

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VeriSign (VRSN - Free Report) is set to report third-quarter 2020 results on Oct 22.

The Zacks Consensus Estimate for third-quarter earnings has remained steady at $1.26 per share over the past 30 days, implying a 7.4% decline from the figure reported in the year-ago period.

The consensus mark for revenues is pegged at $316.3 million, indicating an increase of 2.5% from the year-ago quarter reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, with the average surprise being 4.96%.

Let’s see how things have shaped up for the upcoming announcement.

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. price-eps-surprise | VeriSign, Inc. Quote

Factors to Note

Growth in .com and .net domain name registrations is likely to have benefited the company’s performance in the to-be-reported quarter.

VeriSign has been benefiting from its “exclusive” contract with The Internet Corporation for Assigned Names and Numbers (ICANN) for .com, .net and .name generic top-level domains.

On Mar 27, Verisign entered into the Third Amendment to the .com Registry Agreement with ICANN, which, among other changes, permitted Verisign to increase the price of .com domain name registrations by upto 7% over the previous year, in each of the final four years of each six-year period. The first such six-year period began on Oct 26, 2018.

Notably, ICANN is not a price regulator and depends on the U.S. government for .com prices. The price increase from the current wholesale price of $7.85 to the maximum price of $10.26 in 2024 indicates annual increase of $2.41.

In view of the COVID-19 crisis, Verisign announced on Mar 25 that will freeze registry prices for all its Top-Level Domains (TLDs) — including .com and .net — through 2020-end.

Notably, the company ended second-quarter 2020 with 162.1 million .com and .net domain name registrations, up 3.8% year over year. A net increase of 1.4 million registrations was reflected during the quarter.

VeriSign processed 11.1 million new domain name registrations for .com and .net compared with 10.3 million in the year-ago quarter. Markedly, renewal rates are not fully measurable until 45 days after the end of the quarter.

Per VeriSign’s latest The Domain Name Industry Brief report, domain name registrations increased 3.3 million or 0.9% sequentially to 370.1 million across TLDs at the end of second-quarter 2020. Domain name registrations increased 15.3 million or 4.3% year over year.

However, increasing operating expenses related to research and development as well as sales and marketing are likely to have weighed on the company’s third-quarter bottom-line performance.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Verisign has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Corning Incorporated (GLW - Free Report) has an Earnings ESP of +0.59% and currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Harmonic Inc. (HLIT - Free Report) has an Earnings ESP of +15.00% and flaunts a Zacks Rank of 1, at present.

Alphabet (GOOGL - Free Report) has an Earnings ESP of +16.30% and carries a Zacks Rank of 3, currently.

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