On Jan 26, 2013, Zacks Investment Research upgraded Symantec Corp. (SYMC) to a Zacks Rank #1 (Strong Buy).
With a decent return of 38.9% over the past 6-months and a positive estimate revision trend, this provider of security solutions is an attractive investment opportunity.
Why the Upgrade?
An upbeat third quarter 2013, solid restructuring plans to boost margins and plans to return 50.0% of free cash flow through share buyback and dividends have contributed to the upgrade.
Symantec reported third quarter earnings per share of 40 cents, ahead of the Zacks Consensus Estimate of 33 cents and up 2.6% from the year-ago quarter.
Revenues grew 4.4% year over year to $1.79 billion, supported by good performance across geographies and segments.
Margins were lackluster due to higher operating costs. But solid cash position, unchanged debt position and continued share repurchase were the quarter’s positives.
There was no explicit guidance disclosed during the earnings call. However, the company announced plans to increase focus on growing organic revenues and return 50.0% of free cash flow through share buybacks and dividend payouts.
The company’s newly appointed CEO, Steve Bennett, who had been associated with Intuit Inc. (INTU) and General Electric Co. (GE), also announced plans to lay off managers and staff across certain operating divisions in order to boost operating margins. On the other hand, management stated that research and development expenses would increase on account of new product launches.
Post earnings release, only one estimate was revised upward for fiscal 2013 in the last 7 days, leaving the Zacks Consensus Estimate of $1.47 unchanged.
For the past four quarters, the company has posted an average surprise of 10.5%. Considering the organizational and strategic changes by the CEO, Symantec has the potential to post a positive earnings surprise in the upcoming quarter.
Other Stocks to Consider:
Investors could also consider other application solutions providers that are doing well right now. NetSol Technologies Inc. (NTWK) has a Zacks Rank #1 (Strong Buy) and Compuware Corp. (CPWR) has a Zacks Rank #2 (Buy).
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