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Check Point's (CHKP) Q3 Earnings and Revenues Beat Estimates

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Check Point Software Technologies Ltd. (CHKP - Free Report) reported solid third-quarter 2018 results wherein its top line and bottom line beat the Zacks Consensus Estimate.

The company’s non-GAAP earnings per share of $1.38 beat the Zacks Consensus Estimate of $1.36. The figure came within the company’s guidance of $1.30-$1.40 and climbed 6% year over year, driven mainly by higher security subscriptions, reduced cost of revenues and a lower share count.

Revenues came in at $471 million, up approximately 4% year over year. The figure was within the company’s guidance of $454-$474 million and beat the Zacks Consensus Estimate of $466 million.
 

Quarter Details

Security subscription revenues continued to be strong at $136.4 million, increasing 13.4% year over year. However, revenues of $121.1 million from Products and licenses fell 5.9%.

Software updates and maintenance revenues increased to $213.3 million, representing 3.7% growth.

Geographically, the Americas generated 47% of total revenues, Europe accounted for 37% while the Asia Pacific, Japan and the Middle East and Africa accounted for the remaining 16%.

Notably, performance of the U.S sales force continued improving in the third quarter. The U.S sales force had negatively impacted the results of the first quarter and had started to show improvement in the second quarter.

Talking about deal size, the number of new customers — who signed deals worth $1 million or more — totaled 58. The value of these transactions increased significantly in this quarter.

Check Point also announced its acquisition of Dome9, with which the company expects to enhance its Infinity architecture and CloudGuard security offering.

During the quarter, Check Point bagged deals in various industries. Moreover, the company hit a few milestones this quarter, including its Independent Software Vendor partnership with Blackberry (BB - Free Report) to combat cyber security threat.

Also, it launched SandBlast Mobile 3.0, which offers threat prevention technology for enterprises to enable employees to safely conduct business using their mobile devices. Further, Check Point unveiled Generation V Security Gateway for enterprises and data centers.

The company believes that the combination of Dome9, CloudGuard IaaS and SandBlast products will expand its cloud security capabilities.

Operating Results

Non-GAAP operating income came in at $249.8 million, falling 0.4% year over year. Non-GAAP operating margin contracted 50 basis points to 53%. This can be attributed to increased investments in sales and marketing efforts by the company.

Non-GAAP net income was $219.3 million, up from $215.3 million in the year-earlier quarter.

Balance Sheet & Other Financial Details

Check Point exited the third quarter with cash and cash equivalents, marketable securities and short-term deposits of $4.07 billion compared with $4.04 billion in the previous quarter.

During the reported quarter, the company generated cash worth $249 million from operational activities compared with $259.8 million in the last quarter.

The company repurchased approximately 2.6 million shares for about $300 million.

Outlook

The company has provided guidance for the fourth quarter, which includes the effect of the acquisition of Dome9.

Revenues, which will not be materially impacted by the acquisition, are expected to be between $500 million and $528 million.

Non-GAAP earnings is projected in the range of $1.56 to $1.67 per share, reflecting a reduction of 2-4 cents as a result of the buyout. Moreover, increasing sales and marketing investments will remain an overhang.

Zacks Rank and Stocks to Consider

Check Point currently carries a Zacks Rank #3 (Hold).

A few  stocks worth considering in the broader Computer and Technology sector are CyberArk Software Ltd. (CYBR - Free Report) and Vishay Intertechnology, Inc. (VSH - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for CyberArk and Vishay is projected to be 19.83% and 9.16%, respectively.

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