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Symantec's (SYMC) Q3 Earnings to Be Affected by Divestment

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Symantec Corporation (SYMC - Free Report) is slated to release its third-quarter fiscal 2018 results on Jan 31. The question lingering on investors’ minds is if this cyber security provider will be able to deliver a positive surprise this time around.

Notably, Symantec has a mixed earnings surprise history. In the trailing four quarters, the stock surpassed the Zacks Consensus Estimate twice, matched once and fell short on the other occasion. It has an average positive earnings surprise of 4.3%.

Let’s see how things are shaping up prior to this announcement.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Symantec is likely to beat estimates this quarter, as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Symantec carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of -1.38%.

The Zacks Consensus Estimate for the third quarter earnings is pegged at 44 cents per share. Additionally, analysts polled by Zacks project revenues of roughly $1.26 billion.

Factors to Consider

A surge in demand for cybersecurity-related products due to the recent global hacking events is a key growth factor for Symantec. The two back-to-back ransomware attacks — WannaCry (or WannaCrypt) in May and Petya in June last year — along with data breach at Equifax, are likely to continue impacting the demand positively.

The company also enriched its solutions portfolio with a comprehensive cloud security solution during the quarter, which is also expected to benefit the top line going forward. Notably, the company added British Telecommunications to its clientele during the quarter, yet another positive.

Additionally, during the third-quarter the company announced that the principal components of its Integrated Cyber Defense platform are now accessible through Oracle Cloud Marketplace, which is expected to expand its presence in the market.

However, we are skeptical about the company’s divestment of the high-margin certified authority business to DigiCert Inc. The division was sold in October 2017 and the loss of high margin associated with this business may drag on Symantec’s profitability.

Moreover, we are apprehensive about the company’s lowered revenues and non-GAAP earnings outlook for fiscal 2018 due to the effect of faster-than-expected booking mix shift toward more “ratable revenue recognition.”

Some Stocks with a Favorable Combination

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.

Facebook, Inc. (FB - Free Report) has an Earnings ESP of +0.68% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microsoft Corp. (MSFT - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank #3.

Apple Inc. (AAPL - Free Report) has an Earnings ESP of +1.56% and a Zacks Rank #3.

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