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What's in the Cards for VeriSign (VRSN) in Q1 Earnings?

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VeriSign Inc. (VRSN - Free Report) is set to report first-quarter 2018 results on Apr 26.
   
We note that the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 2.30%.

Last quarter, VeriSign reported non-GAAP earnings per share of 96 cents, which missed the Zacks Consensus Estimate by a penny but marked an increase of 4 cents from the year-ago quarter.

Revenues increased 3.2% year over year to $296 million and came slightly ahead of the Zacks Consensus Estimate of $295 million.

For the first quarter of 2018, the Zacks Consensus Estimate for VeriSign’s earnings per share and total revenues are pegged at $1.06 and $298 million, respectively, representing an increase of 10.4% and 3.1% from the year-ago period.

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. Price and EPS Surprise | VeriSign, Inc. Quote

Domain Registration to Drive Growth

VeriSign holds a prime position in the highly regulated .com and .net domain industry. The company is the exclusive registrar of the .com, .net and .name domains per its agreements with The Internet Corporation for Assigned Names and Numbers (ICANN). Per the company’s agreement with ICANN, the annual fee for a .net domain name registration has been increased from $8.20 to $9.02 effective Feb. 1, 2018.

We believe that increasing domain name registration coupled with price hikes for domain names will drive the top line.

According to the company’s latest “The Domain Name Industry Brief”, domain name registrations across all top-level domains (TLDs) signal a positive trend, increasing 0.5% sequentially to approximately 332.4 million across TLDs at the end of the fourth quarter. Domain name registrations increased 3.1 million or 0.9% year over year.

On a combined basis, .com and .net domain names improved 2.4% year over year to approximately 146.1 million in the December quarter. Reportedly, new .com and .net registrations were 9 million compared with 8.8 million in the year-ago quarter.

The Zacks Consensus Estimate for active domain names ending .com and .net for the first quarter stands at 148 million, indicating an increase of 2.8% from the year-ago figure.

We note that the company continues to benefit from strong demand in the United States as well as in international markets. VeriSign reported that .com continued to maintain its position as the largest TLD, followed by .cn (China) and .tk (Tokelau).

For the first quarter, VeriSign projects domain name base registration to increase in the range of 1.5 million to 2 million.

However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to sales and marketing remain primary headwinds.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

VeriSign has a Zacks Rank #2 and an Earnings ESP of +2.83%. This indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

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

Western Digital Corporation (WDC - Free Report) with an Earnings ESP of +2.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software (PAYC - Free Report) with an Earnings ESP of +0.33% and a Zacks Rank #1.

Seagate Technology PLC (STX - Free Report) with an Earnings ESP of +6.69% and a Zacks Rank #2.

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