Check Point Software Technologies
) is scheduled to announce its third quarter 2012 results on
October 17, before market opens but no estimate revisions at this
point could be noticed.
Second Quarter Overview
Check Point delivered an impressive second quarter in terms of
year-over-year comps, but missed the Zacks Consensus Estimates both
in terms of top and bottom lines. Earnings per share (EPS) of 71
cents missed the Zacks Consensus Estimate by a penny. But the
quarter's results increased 18.3% from a year ago. Revenue saw a
9.3% year-over-year increase, aided by strong performances by
Product & Licenses as well as Software Updates, Maintenance and
The overall improvement was mainly aided by the growing demand for
the company's security products and strong geographic
contributions. The growth in demand was largely due to a general
customer pattern of upgrading security levels. Also, cost
reductions helped in margin expansion. However, currency
fluctuations had a slight negative impact on the results.
For the third quarter, management sees revenue in the range of
$316.0 million to $345.0 million. The guidance reflects some
concern about the macroeconomic environment and Europe. But at the
same time, the company assures that it is ready to face the
challenges with renewed strength buoyed by new product launches and
increase in market share. The company expects EPS of 74-81 cents
for the third quarter. GAAP EPS would be 7 cents less than the
non-GAAP figure due to prevalence of some one-time items.
(Detailed earnings results can be viewed in the blog titled: Check
Point Misses 2Q Estimates.)
Agreement of Analysts
Recently, Check Point received recognition from IT research firm
Gartner, which positions it as the leading vendor for mobile data
protection solutions. Another research firm IDC also finds Check
Point to be the top supplier of Firewall and UTM appliance in the
Industry experts are of the opinion that network security spending
has been consistent in the technology sector due to surge in demand
for big data protection against encryption and leakage.
Analysts are positive on the growth of Check Point's security
software portfolio and believe that it could be a significant
revenue driver, leveraging the market opportunity.
On the other hand, some analysts believe that revenue can be under
pressure due to weakening macroeconomic variables, increased
pricing pressure, slowdown in growth, billing and spending by the
company as well as fresh competition from
Palo Alto Networks Inc.
) in the new target markets of Check Point; challenges in
penetrating new high-end customers, low number of suppliers and
None of the 12 and 13 estimates for the third quarter and fiscal
2012, respectively were revised in the past 30 days. The unanimity
could be due to Euro and macro concerns, which are expected to get
neutralized by the company's confidence to fight it back with new
product launches and market share gains.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the third quarter and fiscal 2012
remained unchanged at 73 cents and $3.00, respectively, over the
past 30 days. Also, the Zacks Consensus Estimate for fiscal 2013
stayed unmoved at $3.33 in the past 30 days. However, all the
estimates moved a penny down in the past 90 days reflecting the
company's cautious guidance.
We think that investor sentiment will be in Check Point's favor as
shareholders remain encouraged by its market share gains from the
Cisco Systems Inc.
Juniper Networks Inc.
). 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. Considering all these, we believe that the third
quarter and fiscal guidance are quite conservative.
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 #3 Rank, implying a short-term
CHECK PT SOFTW (CHKP): Free Stock Analysis
CISCO SYSTEMS (CSCO): Free Stock Analysis
JUNIPER NETWRKS (JNPR): Free Stock Analysis
PALO ALTO NETWK (PANW): Free Stock Analysis
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