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Check Point (CHKP) to Post Q2 Earnings: Is a Beat in Store?

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We expect cybersecurity company, Check Point Software Technologies Ltd. (CHKP - Free Report) , to beat expectations when it reports second-quarter 2017 results on Jul 20.

Last quarter, the company posted a positive earnings surprise of 2.8%. Notably, Check Point Software outperformed the Zacks Consensus Estimate over the trailing four quarters, with an average positive earnings surprise of 5.6%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Check Point Software is likely to beat on earnings because it has the right combination of the two key components.

Zacks ESP: Check Point Software currently has an Earnings ESP of +0.90%. This is because the Most Accurate estimate is pegged at $1.12, while the Zacks Consensus Estimate comes a penny lower at $1.11. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Check Point Software currently carries a Zacks Rank #3 (Hold). It should be noted that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement.

The combination of Check Point Software’s Zacks Rank #3 and a positive ESP make us reasonably confident of a positive earnings beat.

What's Driving the Better-than-Expected Earnings?

Check Point Software has been clocking solid returns and in the year-to-date period it has gained approximately 35.1%, outperforming 22.8% growth recorded by the Zacks categorized Security industry.

We believe that Check Point Software will continue to benefit from strong demand for cybersecurity solutions. It should be noted that the financial well-being, brand image, and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.

With rapid technological advancement, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity, with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.

Moreover, various independent research firms had forecast strong demand in 2017. Gartner had predicted that worldwide Information Security spending would reach $90 billion in 2017, indicating 7.6% growth from the 2016 level of approximately $83.6 billion.

We believe that Check Point Software must have capitalized on this opportunity. We anticipate that this might be well reflected in the company’s results in the quarter to be reported.

Furthermore, the rapid adoption of Check Point Software’s data center appliances and the consistent enhancements in data center product lines are likely to provide adequate support to revenue growth. Additionally, the company’s continuous share buybacks bode well for investors.

Other Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:

Cypress Semiconductor Corporation (CY - Free Report) , slated to release earnings on Jul 27, currently has an Earnings ESP of +11.11% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

MSCI Inc. (MSCI - Free Report) , scheduled to release earnings on Jul 27, currently has an Earnings ESP of +2.22% and a Zacks Rank #1.

Apple Inc. (AAPL - Free Report) , slated to release earnings on Aug 1, currently has an Earnings ESP of +5.13% and a Zacks Rank #3.

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