Gen Digital (GEN) to Report Q2 Earnings: What's in the Offing?
Gen Digital GEN is slated to report second-quarter fiscal 2024 results on Nov 7. Gen Digital was formerly known as NortonLifeLock Inc. and was trading under the NLOK ticker symbol.
NortonLifeLock changed its name and ticker symbol, effective from Nov 8, 2022, following the completed merger of NortonLifeLock and Avast Plc. The newly named company unites trusted consumer safety brands, including Norton, Avast, LifeLock, AVG, Avira, CCleaner and ReputationDefender.
The company projects quarterly revenues between $940 million and $950 million. The Zacks Consensus Estimate for second-quarter revenues is pegged at $942.9 million, indicating a 26.1% improvement from the year-ago quarter’s figure of $748 million.
For the second quarter of fiscal 2024, Gen Digital expects non-GAAP earnings in the range of 46 cents-48 cents per share. The Zacks Consensus Estimate is pegged at 47 cents per share, a couple of cents higher than the year-ago reported figure of 45 cents.
The company’s earnings surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching on one occasion, the average surprise being 4.1%.
Let’s see how things have shaped up before this announcement.
Gen Digital Inc. Price and EPS Surprise
Gen Digital Inc. price-eps-surprise | Gen Digital Inc. Quote
Factors to Note
Gen Digital’s second-quarter top line is likely to have been primarily driven by the inclusion of the Avast business, which has significantly increased the combined company’s Average Direct Customer count. Our second-quarter estimate for this key metric is pegged at 38.2 million.
Moreover, the expansion of product offerings following the merger of NortonLifeLock and Avast is likely to have facilitated the newly formed company to cross-sell products to each other’s customers, thereby aiding Average Revenue Per User (“ARPU”) growth. Gen Digital’s ARPU increased by 28 cents to $7.26 in the first quarter of fiscal 2024 from $6.98 in the year-ago quarter.
We anticipate the trend is likely to have continued in the to-be-reported quarter. Our second-quarter fiscal 2024 estimate for ARPU is pegged at $7.20, which is 11 cents higher than the second-quarter fiscal 2023 level.
GEN’s second-quarter performance is also likely to have benefited from the increased demand for cybersecurity and ID analytics solutions amid the hybrid work environment. Over the past couple of years, as more people are shifting online, the need for online privacy has been rising. Global workforces working remotely are logging into employers' networks, escalating the need for digital security. This trend is likely to have spurred the demand for Gen Digital’s security products in the fiscal second quarter.
Our second-quarter estimate for Gen Digital’s Consumer Security segment’s revenues is pegged at $583.5 million, indicating a year-over-year increase of 33.8%. Our estimate of $338.6 million for the Identity and Information Protection division implies growth of 13.6% from the year-ago quarter.
An expansion in the EMEA, Asia Pacific and Latin American regions is also likely to have been an upside for GEN this season. Further, the growing number of client bookings, supported by their retention and renewal rates, is anticipated to have contributed to the company’s fiscal second-quarter top line. At the end of the first quarter of fiscal 2024, Gen Digital’s client retention rate was 76%, while bookings grew 34% on a year-over-year basis.
The Norton and Avast antivirus maker’s sustained focus on growing partner channels and employee benefit programs is likely to have driven its performance in the quarter to be reported. Our estimate for the company’s Partner revenues is pegged at $96.1 million, which calls for a 29.8% increase from the year-ago quarter. Additionally, Direct Customer revenues are expected to increase 25.2% year over year to $826.1 million, per our estimate.
However, GEN’s overall second-quarter performance is likely to have been negatively impacted by unfavorable foreign exchange rates. In the last reported financial results for the first quarter of fiscal 2024, foreign currency headwinds negatively impacted non-GAAP EPS by 2 cents.
Additionally, increased interest expenses due to enhanced debt related to Avast acquisition financing are likely to have weighed on the bottom line. Moreover, the company’s earnings per share are expected to have been negatively impacted by the equity dilution impact of the Avast acquisition. To finance the acquisition of Avast, Gen Digital issued 94 million new shares.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Gen Digital this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
Though GEN currently carries a Zacks Rank of 3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Synopsys SNPS, Dell Technologies DELL and Snowflake SNOW have the right combination of elements to post an earnings beat in their upcoming releases.
Synopsys sports a Zacks Rank #1 and has an Earnings ESP of +0.94%. The company is scheduled to report fourth-quarter fiscal 2023 results on Nov 29. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 4.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Synopsys’ fourth-quarter earnings is pegged at $3.04 per share, indicating a year-over-year increase of 59.2%. The consensus mark for revenues stands at $1.58 billion, suggesting a year-over-year surge of 23.3%.
Dell sports a Zacks Rank #1 and has an Earnings ESP of +1.14%. The company is scheduled to report third-quarter fiscal 2024 results on Nov 30. Its earnings beat the Zacks Consensus Estimate in the preceding four quarters, with the average surprise being 39.5%.
The Zacks Consensus Estimate for Dell’s third-quarter earnings stands at $1.47 per share, indicating a year-over-year decline of 36.1%. It is estimated to report revenues of $22.93 billion, which suggests a decrease of approximately 7.2% from the year-ago quarter.
Snowflake is slated to report third-quarter fiscal 2024 results on Nov 29. The company has a Zacks Rank #2 and an Earnings ESP of +15.71% at present. Snowflake’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 244.5%.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 15 cents per share, suggesting an increase of 36.4% from the year-ago quarter’s earnings of 11 cents. Snowflake’s quarterly revenues are estimated to grow 27.6% year over year to $710.5 million.
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