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What to Expect From Check Point (CHKP) This Earnings Season?

Check Point Software CHKP is scheduled to report second-quarter 2020 results on Jul 22.

Over the trailing four quarters, the company’s earnings surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2%.

In the last reported quarter, the company’s adjusted earnings of $1.42 per share beat the consensus mark and climbed 7% year over year. Revenues increased 3% year over year to $486 million, surpassing the Zacks Consensus Estimate of $481 million.

Check Point Software didn’t issue any second-quarter guidance during the first-quarter earnings call citing economic and business uncertainties due to the coronavirus crisis. The company had stated that as most of the world is under lockdown due to the pandemic, a change in demand pattern is likely. The company is still assessing the potential impact of the pandemic-led disruptions on its business, and thus, refrained from providing any formal guidance for the second quarter or 2020.
 

Check Point Software Technologies Ltd. Price and Consensus

Check Point Software Technologies Ltd. Price and Consensus

Check Point Software Technologies Ltd. price-consensus-chart | Check Point Software Technologies Ltd. Quote

For the June-end quarter, the Zacks Consensus Estimate for revenues is pegged at $486.4 million, suggesting a 0.4% decline from the year-ago reported figure. However, the consensus mark for earnings is pinned at 12 cents, calling for an increase of 2.9% year on year.

Let’s see how things have shaped up prior to this announcement.

Key factors

Check Point Software’s quarterly performance is likely to benefit from the increasing security subscriptions on solid demand for its CloudGuard and Infinity products.

Moreover, a huge global workforce is working remotely in a bid to contain the spread of infection. However, more people logging into employers' networks means a greater need for security. This trend might have had a positive impact on demand for Check Point’s products during the quarter under review.

Additionally, increased demand for network security gateways to support higher capacities amid the work-from-home wave is expected to have spurred demand for the company’s remote access VPN solutions.

However, lack of components in the supply chain due to the pandemic-induced business disruptions, and labor and logistics issues might have thwarted Check Point’s second-quarter overall financial performance. Also, revenues from the Products segment are likely to have declined further during the period under discussion due to the company’s ongoing business transition to cloud solutions.

Further, increased investments in sales and marketing (S&M) efforts by the company might have clipped margins during the quarter to be reported. Notably, the company’s non-GAAP operating margin shrunk 200 basis points, year over year, to 48% in the March-end quarter mainly on a 6% rise in S&M expenses.

What Our Model Says

Our proven model does not predict an earnings beat for Check Point Software this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Check Point Software currently carries a Zacks Rank of 4 and has an Earnings ESP of 0.00%.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this season:

Synaptics SYNA has an Earnings ESP of +10.6% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook FB has an Earnings ESP of +5.28% and currently carries a Zacks Rank of 3.

Alphabet GOOGL has an Earnings ESP of +1.31% and carries a Zacks Rank of 3, currently.

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