Check Point Breezes Through in 4Q - Analyst Blog
January 18 2012 - 8:45AM
Zacks
Check Point Software
Technologies Ltd. (CHKP) exited fourth quarter 2011 with
flying colors. Earnings of 80 cents per share handily beat the
Zacks Consensus Estimate of 77 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. Shares surged 7.82% in the
after-hour trade.
Revenue
Check Point reported revenue of
$356.8 million in the fourth quarter, up 12.0% from $318.5 million
in the year-ago period. The quarter’s result was much better than
the company’s expectation. The improvement can be attributed to a
10.6% year-over-year growth in Product and Licenses revenue.
Moreover, Check Point witnessed a total 13.2% 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 product
launches. The growth in demand was largely due to a general
customer pattern of upgrading security levels. Management also
reported strong performance regarding the number of large deals,
which doubled from the year-ago quarter.
Operating
Results
Reported gross profit increased
12.8% year over year to $306.0 million. Gross margin increased 30
basis points from the year-ago quarter to 85.8%.
Operating income came in at $192.6
million, up 18.9% year over year. Operating margin increased 310
basis points year over year to 54.0%. The improvement in operating
results was driven by strong revenue growth that outpaced the 3.6%
increase in operating expenses. Cost control was also noticed with
the year-over-year drop in R&D expenses.
The quarter’s GAAP net income was
$159.8 million or 75 cents per share, up from $137.4 million or 64
cents in the comparable quarter last year. Excluding special items
but including stock-based compensation expense, non-GAAP net income
was $169.2 million or 80 cents a share compared with $149.1 million
or 70 cents in the year-earlier quarter.
Balance Sheet & Cash
Flow
Check Point exited the quarter with
cash, cash equivalents and marketable securities of approximately
$1.36 billion, up from $1.21 billion in the prior quarter. Trade
receivables were $357.4 million. Cash flow from operations was
$173.2 million, up from $154.5 million in the previous quarter.
Capital expenditure decreased to $1.72 million from $1.98 million
in the prior quarter. During the quarter, Check Point repurchased
1.32 million shares for a total consideration of $75.0 million.
First Quarter & Fiscal
2012 Outlook
Management sees revenue in a range
of $305 million to $315 million, and EPS (excluding one-time items)
in the range of 69 cents to 73 cents. For fiscal 2012, Check Point
expects revenue of $1.345–$1.395 billion and EPS ex-items of
$3.10–$3.20. The Zacks Consensus Estimate for the first quarter and
fiscal 2012 are pegged at 67 cents and $2.69, respectively.
Our Take
Check Point delivered an impressive
fourth quarter, beating the Zacks Consensus Estimate with respect
to earnings per share. We think that investor sentiment will be in
Check Point’s favor as shareholders remain encouraged by its market
share gains from the tech giant Cisco Systems Inc.
(CSCO) and Juniper Networks Inc. (JNPR). Check
Point continues to benefit from strength at the high end of the
market, and increased demand for its blade solutions. Moreover, the
company’s continuous product launches are encouraging.
However, limited margin expansion
potential (over dependence on indirect sales model), an uncertain
economic environment competitive pressures and Check Point’s
significant European exposure are concerns.
Currently, Check Point has a Zacks
#4 Rank, implying a short-term Sell recommendation.
CHECK PT SOFTW (CHKP): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
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