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Check Point (CHKP) to Report Q4 Earnings: What's in Store?

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Check Point Software Technologies Ltd. (CHKP - Free Report) is scheduled to report fourth-quarter 2018 results on Jan 30.

Notably, the company outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 3.06%.

In the last reported quarter, Check Point’s earnings increased 6% year over year to $1.38, topping the Zacks Consensus Estimate of $1.36. The company’s revenues increased 4% to $471 million and beat the consensus estimate of $466 million.

For the fourth quarter, the company expects revenues to be between $500 million and $528 million. Non-GAAP earnings are projected in the range of $1.56 to $1.67 per share.

For the quarter, the Zacks Consensus Estimates for earnings is pegged at $1.63, indicating 3.16% increase on a year-over-year basis. The same for revenues stands at $516.13 million, indicating a 2% rise.

Let's see how things are shaping up for this announcement.

Factors at Play

Check Point is gaining traction from growing adoption of its cloud-based solutions. Continued strength in security subscription is a major catalyst behind Check Point’s growth. It is witnessing a large number of subscriptions, which is expected translate into significant revenues in the quarter to be reported.

In the last reported quarter, the company launched SandBlast Mobile 3.0 that offers threat prevention technology to enterprises, enabling employees to safely conduct business using mobile devices. This technology is expected to strengthen its cloud security capabilities.

Check Point continues to execute on the enhancement of the Infinity architecture. The pipeline for Infinity deals remains strong. In the last reported quarter, a number of deals were closed in a variety of industries with midsized as well as large companies. This trend is expected to boost the top line.

The company is winning new customer accounts, which is driving revenue growth. In the third quarter of 2018, the number of customers who signed deals worth $1 million or more was 58.

Check Point is expected to benefit from its Independent Software Vendor partnership with Blackberry (BB - Free Report) . Moreover, last November, it announced technology integration with Amazon’s (AMZN - Free Report) AWS Security Hub to improve cloud protection for its consolidated security platform, which is likely to reflect positively in the upcoming quarterly results.

However, increased investments in sales and marketing efforts by the company, which led to a 0.4% year-over-year decline in non-GAAP operating income in the last reported quarter, is expected to keep margins under pressure.

Moreover, the buyout of Dome9 in the last reported quarter is expected to lead to a fall of 2-4 cents in earnings per share while having no material impact on revenues in the to-be-reported quarter.

What the Zacks 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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Check Point has a Zacks Rank #3 but its Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here is a stock which you may consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:

Avnet, Inc. (AVT - Free Report) with an Earnings ESP of +0.39%, and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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