Fortinet Inc. FTNT reported strong second-quarter 2019 results, wherein both earnings and revenues surpassed estimates.
Fortinet’s non-GAAP earnings per share of 58 cents beat the Zacks Consensus Estimate of 50 cents, and increased significantly from the year-ago quarter figure of 41 cents.
Revenues of $521.7 million surpassed the consensus estimate of $511 million and increased 18% year over year, driven by growth across both its segments. Strength in the Americas region was also a positive.
Fortinet, Inc. Price, Consensus and EPS Surprise
Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote
Quarter in Detail
Segment wise, Product revenues increased approximately 14.2% year over year to $162.7 million.
Services revenues jumped 20.7% to $331.8 million.
Total deferred revenues of $1.87 billion as of Jun 30, 2019, grew 27%.
Billings were up 21% on a year-over-year basis to $622.4 million. Strong momentum in demand for Fortinet’s Security Fabric, SD-WAN and cloud offerings contributed to billings growth.
During the quarter, the company secured 46 total deals worth more than $1 million, up 28%.
Revenues from the Americas (43% of total revenues) grew 19% year over year to $226 million, revenues from the EMEA (Europe, Middle East and Africa) region (37%) increased 17% to $192 million, and that from APAC (Asia Pacific) region (20%) jumped 19% to $104 million.
Gross margin expanded 100 basis points (bps) year over year to 76.4%, driven by a 100-bps increase in services gross margin, and 110 bps expansion in product gross margin.
Non-GAAP operating income surged 32.3% to $123 million. Non-GAAP operating margin expanded 250 bps to 23.6% on the back of solid revenue growth.
Balance Sheet & Cash Flow
Fortinet exited the reported quarter with cash and cash equivalents, and short-term investments of approximately $1.83 billion, up from $1.8 billion recorded at the end of the previous quarter.
During the second quarter, the company generated operating cash flow of $195.1 million compared with $201.3 million in the previous quarter. Free cash flow was $177.8 million compared with $191.1 million in the first quarter.
For 2019, management increased revenue guidance, and projects the same in the range of $2.10-$2.12 billion compared with $2.07-$2.10 billion estimated earlier. The Zacks Consensus Estimate is pegged at $2.09 billion.
Billings are now expected to be within $2.51-$2.54 billion, up from $2.47-$2.52 billion.
Non-GAAP gross margin continues to be projected in the 75.5-76.5% band. Non-GAAP operating margin is now expected between 23% and 23.5%, up from previously guided 22.5-23.5% range.
Non-GAAP earnings per share expectations were also raised to $2.23-$2.26, up from $2.10-$2.15. The Zacks Consensus Estimate stands at $2.13.
For the third quarter of 2019, the company expects revenues of $525-$540 million. The consensus estimate is pegged at $523.8 million. Billings are estimated in the range of $600-$615 million.
Non-GAAP earnings per share are anticipated in the band of 55-57 cents. The Zacks Consensus Estimate is pegged at 53 cents. Non-GAAP gross margin is expected in the range of 75.5% to 76.5%, whereas non-GAAP operating margin is anticipated between 23% and 23.5%.
Zacks Rank and Key Picks
Fortinet currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader technology sector are Rosetta Stone RST, Anixter International AXE and Alteryx AYX, each flaunting a Zacks Rank #1.
Long-term earnings growth rate for Rosetta Stone, Anixter and Alteryx is currently projected to be 12.5%, 8% and 13.7%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
Rosetta Stone (RST) : Free Stock Analysis Report
Anixter International Inc. (AXE) : Free Stock Analysis Report
Alteryx, Inc. (AYX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research