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4 Cyber Security Stocks that Posted Solid Q2 Earnings


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The second-quarter earnings season is almost over with less than 10% of the companies left to report their results. In the broader technology sector, cyber security stocks stole the show as most of the players beat our earnings and revenue estimates, and issued upbeat guidance.

Over the past few years, numerous data breaches at high-profile business houses and government agencies prompted the need to impose tighter security measures. As a result, the industry is flourishing as can be seen from the latest earnings results.

Cyber Security Stocks' Earnings in Focus

The cyber security providers that have reported so far this season, fared splendidly, surpassing the Zacks Consensus Estimate on both top and bottom lines. These companies include Fortinet Inc. FTNT , Check Point Software Technologies Ltd. CHKP , FireEye Inc. FEYE and CyberArk Software Ltd. CYBR . Networking behemoth, Cisco Systems Inc. CSCO , is set to release results today, after the market closes.

Check Point and Fortinet were the first to report their earnings results this season, in the cyber security space, on Jul 22.

Check Point topped our estimates for both the top line and the bottom line by 3 cents and $3 million, respectively. This Zacks Rank #3 (Hold) stock expects earnings per share within 92 cents to $1.02 (mid-point 97 cents) on revenues of $392-$410 million (mid-point $401 million) for the third quarter.

The mid-points are well above our estimate of 88 cents for earnings but slightly below $402 million for revenues. For the fiscal year, revenues and earnings are expected in the range of $1.6-$1.65 billion (mid-point $1.625 billion) and $3.90-$4.02 (mid-point $3.96), respectively, well ahead of the Zacks Consensus Estimate of $1.626 billion and $3.66.

Fortinet 's earnings per share of 3 cents came ahead of the Zacks Consensus Estimate by a penny and revenues of $240 million breezed past our estimate of $227 million.

For 2015, this Zacks Rank #3 stock raised the revenue forecast to $1.0-$1.1 billion from $935-$940 million while reaffirming the earnings guidance of 51-52 cents. The Zacks Consensus Estimate is currently pegged at $992 million for revenues and 20 cents for earnings. Further, for the third quarter, Fortinet expects revenues within $255-$260 million and earnings per share of 12 cents. The Zacks Consensus Estimate for revenues and earnings currently stand at a respective of $259 million and 4 cents.

FireEye also reported solid second-quarter results on Jul 30. Net loss of 78 cents was lower than the Zacks Consensus Estimate of a loss of 84 cents, while revenues of $147 million surpassed our estimate of $143 million. The Zacks Rank #3 company guided to revenues of $164-$168 million for the third quarter and raised the full-year guidance to $630-$645 million from $615-$635 million. The mid-points are below the current Zacks Consensus Estimate of $167 million and $640 million, respectively.

Net loss per share is projected at 44-48 cents for the third quarter and $1.70-$1.80 for the full year, narrower than the $1.75-$1.85 range. The Zacks Consensus Estimate is currently pegged at a loss of 90 cents for the third quarter and $3.35 for the full year.

Yesterday, CyberArk announced the quarterly results. The company's adjusted earnings of 15 cents per share comfortably beat the Zacks Consensus Estimate of 4 cents, and revenues of $36.4 million surpassed our estimate of $32 million.

Buoyed by the splendid second-quarter performance, the company raised its revenue and earnings forecast for 2015. The company now projects revenues in the range of $145-$147 million, up from $136-$138 million. Similarly, non-GAAP earnings are estimated to come within 62-65 cents as against 40-44 cents. The Zacks Consensus Estimate for revenues and earnings of this Zacks Rank #3 stock are pegged at $139 million and 35 cents, respectively.

What is Driving this Growth?

The demand for cyber security is on the rise. Notably, all the companies mentioned above have remarked that the strength in the network security market had led to a large number of deal wins and these customer additions contributed to the tremendous growth.

The recent deal between FireEye and Visa Inc. V to develop joint threat intelligence tools and services for card issuing companies shows the commitment of financial service providers to avoid a data breach.

Furthermore, in May, global telecom service provider, Vodafone, implemented CyberArk's solutions - CyberArk Enterprise Password Vault and CyberArk Privileged Session Manager - to provide data security to its privileged accounts.

With rapid technological advancement, more organizations are adopting the Bring Your Own Device (BYOD) policy to enhance employee productivity with anytime, anywhere access. This trend, on the other hand, has made it necessary for companies to enforce stricter data security measures.

Moreover, the incidents at Anthem Inc. ANTM and Sony Corp. SNE earlier this year put security on the radar for many companies.

It should also be noted that cyber security companies are witnessing double-digit growth, while overall IT spending is anticipated to grow just under 3% in 2015, according to research firm, Gartner. The research firm also estimates that worldwide spending on IT security in 2014 was about $70 billion which is likely to jump to $76.9 billion in 2015.

Considering the aforementioned factors, it makes sense to invest in this hot industry group as cyber security players are likely to witness solid growth, going ahead.

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SONY CORP ADR (SNE): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

CHECK PT SOFTW (CHKP): Free Stock Analysis Report

CISCO SYSTEMS (CSCO): Free Stock Analysis Report

FIREEYE INC (FEYE): Free Stock Analysis Report

FORTINET INC (FTNT): Free Stock Analysis Report

CYBER-ARK SFTWR (CYBR): Free Stock Analysis Report

ANTHEM INC (ANTM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: SNE , V , CHKP , CSCO , FEYE



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