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Palo Alto Networks PANW reported fourth-quarter fiscal 2020 non-GAAP earnings of $1.48 per share, which surpassed the Zacks Consensus Estimate $1.39. Moreover, the bottom line compares favorably with the year-ago quarter’s earnings of $1.47 per share.
The company’s revenues of $950.4 million improved 18% year over year. The figure also beat the Zacks Consensus Estimate of $920.9 million.
The top line was primarily aided by several deal wins and increasing adoption of the company’s next-generation security platforms on the rising remote-working trend and heightening need for stronger security. Growing traction in the Prisma and Cortex offerings also acted as a tailwind.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote
Product revenues remained flat year over year at $305.6 million and contributed to 32% of the total revenues. The company’s subscription and support revenues, which accounted for 68% of the total revenues, improved 28.9% to $644.8 million.
Further, billings improved 32% year over year to $1.4 billion. Deferred revenues also jumped 32% to $4.3 billion.
Additionally, Palo Alto’s non-GAAP gross margin contracted 320 basis points (bps) on a year-over-year basis to 74.3%. In addition, non-GAAP operating margin shrunk 180 bps to 19.8%.
Palo Alto exited the fiscal fourth quarter with cash, cash equivalents and short-term investments of $3.75 billion compared with the $2.2 billion recorded at the end of the previous quarter. The company’s balance sheet does not carry any long-term debt.
During the quarter, it generated cash flow from operations of $333.7 million and free cash flow of $301.9 million. In fiscal 2020, the company generated operating and free cash flows of $1.04 billion and $821.3 million, respectively.
For first-quarter fiscal 2021, Palo Alto anticipates year-over-year revenue growth of 19-20%, which comes in between $915 million and $925 million. Billing growth is anticipated between 15% and 17%, ($1.03 billion-$1.05 billion).
Non-GAAP earnings per share are estimated in the range of $1.32-$1.35.
Zacks Rank and Key Picks
Currently, Palo Alto Networks carries a Zacks Rank of 3 (Hold).
Some better-ranked stocks in the broader technology sector include Apple AAPL, Lam Research Corporation LRCX and Synaptics SYNA, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Apple, Lam Research and Synaptics is currently pegged at 10.7%, 15.4%, and 10%, respectively.
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