Back to top

Image: Bigstock

Gen Digital (GEN) to Report Q3 Earnings: What's in Store?

Read MoreHide Full Article

Gen Digital (GEN - Free Report) is slated to report third-quarter fiscal 2023 results on Feb 2. Gen Digital was formerly known as NortonLifeLock Inc. and was trading under the NLOK ticker symbol.

NortonLifeLock changed its name and ticker symbol, effective from Nov 8, 2022, following the completed merger of NortonLifeLock and Avast Plc. The newly named company unites trusted consumer safety brands, including Norton, Avast, LifeLock, AVG, Avira, CCleaner and ReputationDefender.

The company projects quarterly revenues between $925 million and $940 million, suggesting a year-over-year increase in the band of 31%-34%. The Zacks Consensus Estimate for third-quarter revenues is pegged at $929.2 million, indicating a 32% improvement from the year-ago quarter’s figure of $704 million.

For the third quarter of fiscal 2023, Gen Digital expects non-GAAP earnings in the range of 42 cents-45 cents per share. The Zacks Consensus Estimate is pegged at 42 cents per share, a couple of cents lower than the year-ago reported figure of 44 cents.

The company’s earnings surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matching the same on two occasions, the average surprise being 2.3%.

Let’s see how things have shaped up before this announcement.

Gen Digital Inc. Price and EPS Surprise Gen Digital Inc. Price and EPS Surprise

Gen Digital Inc. price-eps-surprise | Gen Digital Inc. Quote

Factors to Note

Gen Digital’s third-quarter top line is likely to have been primarily driven by the inclusion of the Avast business. Moreover, the expansion of product offerings following the merger of NortonLifeLock and Avast is likely to have facilitated the newly formed company to cross-sell products to each other’s customers, thereby aiding revenue growth.

Moreover, the increased demand for cybersecurity and ID analytics solutions amid the hybrid work environment is likely to have favored the to-be-reported quarter’s performance.

Over the past couple of years, as more people are shifting online, the need for online privacy has been rising. Global workforces working remotely are logging into employers' networks, escalating the need for digital security. This trend is likely to have spurred the demand for Gen Digital’s security products in the fiscal third quarter.

An expansion in the EMEA, Asia Pacific and Latin American regions is also likely to have been an upside for GEN this season. Further, the growing number of client bookings, supported by their retention and renewal rates, is anticipated to have contributed to the company’s fiscal third-quarter top line. At the end of the second quarter of fiscal 2023, Gen Digital’s client retention rate was 75%, while bookings grew 6%.

The Norton and Avast antivirus maker’s sustained focus on growing partner channels and employee benefit programs is likely to have driven its performance in the quarter to be reported. However, GEN’s overall third-quarter performance is likely to have been negatively impacted by unfavorable foreign exchange rates. On its last earnings conference call, the company stated that the strong U.S. dollar is likely to negatively impact third-quarter revenues by $40 million.

Moreover, the company’s earnings per share are expected to be negatively impacted by the equity dilution impact of the Avast acquisition. To finance the acquisition of Avast, Gen Digital issued 94 million new shares.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Gen Digital this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

Though GEN currently carries a Zacks Rank of 3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, Meta Platforms (META - Free Report) , Check Point Software (CHKP - Free Report) and Cisco Systems (CSCO - Free Report) have the right combination of elements to post an earnings beat in their upcoming releases.

Meta is slated to report fourth-quarter 2022 results on Feb 1. The company has a Zacks Rank #3 and an Earnings ESP of +13.39% at present. META’s earnings beat the Zacks Consensus Estimate once in the trailing four quarters while missing the same on three occasions, the average surprise being -2.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.23 per share, suggesting a decline of 39.2% from the year-ago quarter’s earnings of $3.67. Meta’s quarterly revenues are estimated to decline 7% year over year to $31.3 billion.

Check Point carries a Zacks Rank #3 and has an Earnings ESP of +0.23%. The company is scheduled to report fourth-quarter 2022 results on Feb 13. Its earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 3.6%.

The Zacks Consensus Estimate for Check Point’s fourth-quarter earnings stands at $2.35 per share, implying a year-over-year increase of 4.4%. It is estimated to report revenues of $633.6 million, which suggests growth of 5.8% from the year-ago quarter.

Cisco carries a Zacks Rank #3 and has an Earnings ESP of +1.66%. The company is slated to report second-quarter fiscal 2023 results on Feb 15. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.1%.

The Zacks Consensus Estimate for CSCO’s fiscal second-quarter earnings is pegged at 86 per share, indicating a year-over-year increase of 2.4%. The consensus mark for revenues stands at $13.43 billion, suggesting a year-over-year increase of 5.6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Published in