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Check Point (CHKP) to Post Q1 Earnings: What Lies Ahead?

Zacks Equity Research

Check Point Software Technologies Ltd. CHKP is scheduled to report first-quarter 2019 results on Apr 18.

Notably, the company outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 2.67%.

In the last reported quarter, Check Point’s earnings increased 6% year over year to $1.68 per share, topping the Zacks Consensus Estimate of $1.63. The company’s revenues jumped 4% to $526 million and beat the consensus estimate of $517 million.

The company expects first-quarter revenues to be between $460 million and $480 million. Non-GAAP earnings are projected in the range of $1.28 to $1.34 per share.

For the quarter, the Zacks Consensus Estimate for earnings is pegged at $1.32, indicating 1.5% increase on a year-over-year basis. The same for revenues stands at $471.23 million, indicating a 4.2% rise.

Let's see how things are shaping up for this announcement.

Factors at Play

Check Point is gaining traction from growing adoption of its cloud, mobile and zero-day advanced threat prevention technologies. Also, strength in security subscription is a major catalyst. The buyout of Dome9 in the fourth quarter of 2018 is likely to enhance its Infinity architecture and CloudGuard security offering.

Moreover, Check Point hit a few milestones in the last reported quarter, including CloudGuard’s integration with Amazon’s AMZN AWS Security Hub. This further strengthened its CloudGuard portfolio and is expected to reflect positively in the upcoming quarterly results.

The company is winning new customer accounts, which is driving revenues. In the fourth quarter, the number of customers who signed deals worth $1 million or more was 102, up sequentially by 44 customers. This uptrend is likely to continue, given the current prospects of the cybersecurity market.

However, increased investments in sales and marketing efforts by the company, will continue to weigh on margins.

Check Point expects first-quarter 2019 margins to be further under pressure due to expenses from the Dome9 buyout, and the recent acquisition of ForceNock. Margins are likely to be approximately 50%, indicating a decline of 300 basis points.

Check Point Software Technologies Ltd. Price and EPS Surprise

Check Point Software Technologies Ltd. Price and EPS Surprise | Check Point Software Technologies Ltd. Quote

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Check Point has a Zacks Rank #3 but its Earnings ESP is 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here are a couple of stocks which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release:

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gogo Inc. GOGO has an Earnings ESP of +7.99% and is a Zacks #2 Ranked stock.

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