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Check Point (CHKP) Up 2.3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Check Point Software (CHKP - Free Report) . Shares have added about 2.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Check Point due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Check Point Q1 Earnings & Revenues Surpass Estimates
Check Point reported first-quarter 2020 results, wherein both top and bottom lines beat the Zacks Consensus Estimate.
The company’s non-GAAP earnings per share of $1.42 beat the consensus mark by 2.9%. The figure came within the company’s guidance of $1.37-$1.43 and climbed 7% year over year.
Revenues were $486 million, up 3% year over year. The figure came within the company’s guidance of $475-$495 million. Moreover, the figure exceeded the Zacks Consensus Estimate of $481 million.
Increased demand for network security gateways to support higher capacities aided the adoption of the company’s remote access VPN solutions.
However, lack of components in the supply chain due to coronavirus-led disruptions, and closure of some logistic centers were hindrances.
Quarter Details
Security subscription revenues came in at $158.8 million, increasing 10.3% year over year, aided by strong demand for its advanced solutions, primarily CloudGuard, Sandblast Zero-day threat prevention and Infinity solutions. During the quarter, the company secured several Infinity deals in various industries, including government, telecommunication and industrial.
However, revenues of $110.2 million from products and licenses fell 2.3%. Products are in the process of transitioning to cloud solutions, which is included in the subscription line, naturally leading to lower revenues.
Total revenues from product and security subscriptions were $269 million, growing 4.8% year over year.
Software update and maintenance revenues increased to $217.5 million, up 1.2%.
As of Mar 31, deferred revenues were $1.35 billion, up 3% year over year, reflecting strength in security subscription.
Region-wise, the Americas generated 46% of total revenues; Europe, Middle East and Africa accounted for 43%; and the Asia Pacific contributed 11%.
The first quarter witnessed strong execution in the Americas, driven mainly by strength in financial services and healthcare verticals.
Non-GAAP operating income for the reported quarter came in at $231 million, decreasing 1.7% year over year. Non-GAAP operating margin contracted 200 basis points to 48%.
Balance Sheet & Other Financial Details
Check Point exited the first quarter with cash and cash equivalents, marketable securities and short-term deposits of $3.99 billion compared with the previous quarter’s $3.95 billion.
The company generated cash worth $359 million from operational activities, up from the previous quarter’s $246.4 million.
It repurchased approximately 3 million shares for about $325 million in the first quarter.
Outlook
As most of the world is under lockdown due to coronavirus, a change in demand pattern is expected. Check Point is still assessing the potential impacts of the pandemic-led disruptions on its business, and thus refrained from providing any formal guidance for the second quarter or 2020.
Nonetheless, some customers who are seeing a disproportionate economic impact are likely to be credit constrained in the second quarter. Check Point is evaluating suitable payment terms to ensure continued service. This is expected to partially affect the cash flow in the second quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Check Point has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. It comes with little surprise Check Point has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Check Point (CHKP) Up 2.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Check Point Software (CHKP - Free Report) . Shares have added about 2.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Check Point due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Check Point Q1 Earnings & Revenues Surpass Estimates
Check Point reported first-quarter 2020 results, wherein both top and bottom lines beat the Zacks Consensus Estimate.
The company’s non-GAAP earnings per share of $1.42 beat the consensus mark by 2.9%. The figure came within the company’s guidance of $1.37-$1.43 and climbed 7% year over year.
Revenues were $486 million, up 3% year over year. The figure came within the company’s guidance of $475-$495 million. Moreover, the figure exceeded the Zacks Consensus Estimate of $481 million.
Increased demand for network security gateways to support higher capacities aided the adoption of the company’s remote access VPN solutions.
However, lack of components in the supply chain due to coronavirus-led disruptions, and closure of some logistic centers were hindrances.
Quarter Details
Security subscription revenues came in at $158.8 million, increasing 10.3% year over year, aided by strong demand for its advanced solutions, primarily CloudGuard, Sandblast Zero-day threat prevention and Infinity solutions. During the quarter, the company secured several Infinity deals in various industries, including government, telecommunication and industrial.
However, revenues of $110.2 million from products and licenses fell 2.3%. Products are in the process of transitioning to cloud solutions, which is included in the subscription line, naturally leading to lower revenues.
Total revenues from product and security subscriptions were $269 million, growing 4.8% year over year.
Software update and maintenance revenues increased to $217.5 million, up 1.2%.
As of Mar 31, deferred revenues were $1.35 billion, up 3% year over year, reflecting strength in security subscription.
Region-wise, the Americas generated 46% of total revenues; Europe, Middle East and Africa accounted for 43%; and the Asia Pacific contributed 11%.
The first quarter witnessed strong execution in the Americas, driven mainly by strength in financial services and healthcare verticals.
Non-GAAP operating income for the reported quarter came in at $231 million, decreasing 1.7% year over year. Non-GAAP operating margin contracted 200 basis points to 48%.
Balance Sheet & Other Financial Details
Check Point exited the first quarter with cash and cash equivalents, marketable securities and short-term deposits of $3.99 billion compared with the previous quarter’s $3.95 billion.
The company generated cash worth $359 million from operational activities, up from the previous quarter’s $246.4 million.
It repurchased approximately 3 million shares for about $325 million in the first quarter.
Outlook
As most of the world is under lockdown due to coronavirus, a change in demand pattern is expected. Check Point is still assessing the potential impacts of the pandemic-led disruptions on its business, and thus refrained from providing any formal guidance for the second quarter or 2020.
Nonetheless, some customers who are seeing a disproportionate economic impact are likely to be credit constrained in the second quarter. Check Point is evaluating suitable payment terms to ensure continued service. This is expected to partially affect the cash flow in the second quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Check Point has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. It comes with little surprise Check Point has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.