Check Point Posts Decent 2Q - Analyst Blog
July 19 2011 - 9:15AM
Zacks
Check Point Software
Technologies Ltd.’s (CHKP) second quarter 2011 earnings of
64 cents per share inched past the Zacks Consensus Estimate of 63
cents. The adjusted earnings per share exclude one-time items, but
include stock-based compensation expense. Check Point witnessed
strong network security product sales across all geographical
regions.
Revenue
Check Point reported revenue of
$300.6 million in the second quarter, up 15.1% from $261.1 million
in the year-ago period. The improvement can be attributed to a
14.8% year-over-year growth in Product and Licenses revenue.
Moreover, Check Point witnessed a total 15.4% year-over-year growth
in its Software Updates, Maintenance and Services revenues.
Overall, revenue improvement was driven by the growing demand for
Check Point’s security solutions and Application Control software
blades, as well as new product launches. The growth in demand was
largely due to a general customer pattern of upgrading security
levels.
Operating
Results
Excluding amortization expenses,
but including stock-based compensation expenses, non-GAAP gross
profit increased 15.0% year over year to $266.0 million. Non-GAAP
gross margin was 88.5%, compared to 88.6% in the year-ago
quarter.
Non-GAAP operating income
(including stock-based compensation expenses) came in at $161.1
million, up 18.8% year over year. Operating margin increased 170
basis points year over year to 53.6%. The improvement in operating
results was driven by strong revenue growth that outpaced the 7.7%
increase in operating expenses.
The quarter’s GAAP net income was
$128.0 million or 60 cents per share, up from $102.9 million or 48
cents per share in the comparable quarter last year. Excluding
special items but including stock-based compensation expense,
non-GAAP net income was $137.0 million or 64 cents a share compared
with $114.5 million or 54 cents a share in the year-earlier
quarter.
Balance Sheet & Cash
Flow
Check Point exited the quarter with
cash, cash equivalents and marketable securities of approximately
$1.15 billion, up from $1.08 billion in the prior quarter. Trade
receivables were $197.2 million. Cash flow from operations was
$175.5 million down from $211.6 million in the previous quarter.
Capital expenditure decreased to $1.62 million from $1.86 million
in the prior quarter. During the quarter, Check Point repurchased
1.38 million shares for a total consideration of $75.0 million.
Our Take
Check Point delivered an impressive
second quarter, beating the Zacks Consensus Estimates with respect
to earnings per share. We think that investor sentiment will be in
Check Point’s favor as they remain encouraged by its market share
gains against the tech giant Cisco Systems Inc.
(CSCO).
We are also encouraged by the
steady traction of its Software Blade architecture (security
solution) that will likely lead to solid revenue growth in the
coming quarters, which will in turn drive considerable upside to
the shares.
Currently, CheckPoint has a Zacks
#2 Rank implying a short-term Buy recommendation.
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