Earnings Preview: Check Point - Analyst Blog
April 12 2011 - 8:45AM
Zacks
Check Point Software
Technologies (CHKP) is scheduled to announce its first
quarter 2011 results on April 14, 2011, before market opens and we
see limited revisions in analyst estimates at this point.
Fourth Quarter
Overview
Check Point’s fourth quarter
revenue increased 17.1% from the year-ago period led by strong
Product revenues across all geographical regions. The quarter’s
revenue had surpassed the company’s guided range.
On a GAAP basis, net income per
share surged 25.5% year over year to 64 cents. Excluding the impact
of charges related to amortization of intangible assets, but
including stock-based compensation expense, adjusted net income per
share climbed 22.8% year over year to 70 cents.
Check Point delivered an impressive
fourth quarter, beating Zacks Consensus Estimates both in respect
of revenue and earnings per share. The outperformance was largely
based on continuous networking product adoption including the IP
series, Power-1, UTM-1 and Smart-1 solutions.
Check Point has earned a reputation
among customers and analysts for providing simple, all-in-one
security solutions that provide the highest level of protection to
small and mid-sized businesses and remote/branch offices. Hence, we
believe new product ramps will better serve the growing demand for
Check Point’s security products.
Agreement of
Analysts
Out of the ten and twelve analysts
providing estimates for the first quarter and fiscal 2011,
respectively, none revised their estimates upward in the past 30
days. Also, there was no estimate revision for fiscal 2012.
The limited number of changes to
estimates point to the fact that there was no major catalyst during
the quarter that could drive results. Consequently, most of the
analysts are sticking to the estimates they projected post fourth
quarter earnings.
The analysts are confident about
Check Point’s market share gain versus tech giant Cisco
Systems Inc. (CSCO) based on strong demand for its
high-end (Power-1) and mid-range (UTM-1) appliances. The analysts
are also optimistic about the improved enterprise information
technology spending environment.
Magnitude of Estimate
Revisions
There was no change to the Zacks
Consensus Estimates for the first quarter and fiscal 2011 over the
past 30 days. However, the first quarter estimate moved up a penny
in the past ninety days. Also, the Zacks Consensus Estimate for
fiscal 2011 increased 3 cents over the past ninety days. The reason
for the uptick could be the growing demand for Check Point’s
security products. The Zacks Consensus Estimate for fiscal 2012
witnessed a significant jump of 8 cents since the third quarter
results.
Recommendation
We remain encouraged by the steady
traction of Software Blade architecture (security solution) that
will likely lead to a solid fourth quarter. We believe this would
drive considerable upside to the shares. However, increased
competition from Juniper Networks Inc. (JNPR) and
Microsoft Corp. (MSFT) are concerns.
Currently, CheckPoint has a Zacks
Rank of #3 implying a short-term Hold recommendation.
CHECK PT SOFTW (CHKP): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
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