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Symantec (SYMC) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Symantec Corporation SYMC is scheduled to report second-quarter fiscal 2020 results on Nov 7.

For the second quarter of fiscal 2020, Symantec anticipates non-GAAP revenues in the range of $1.16-$1.21 billion. The Zacks Consensus Estimate stands at $1.18 billion, indicating 0.55% decline from the year-ago reported figure.

Non-GAAP earnings per share are expected between 40 cents and 44 cents by the company. The Zacks Consensus Estimate stands at 42 cents, flat year over year.

The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, matching it once, delivering an average positive surprise of 18.62%.

In the last reported quarter, Symantec reported earnings per share of 43 cents that beat the Zacks Consensus Estimate of 32 cents and increased 26.5% year over year.

On a non-GAAP basis, Symantec generated revenues of $1.25 billion, which beat the consensus estimate of $1.19 billion and improved 7.8% from the year-ago quarter. Strength in Enterprise Security and Consumer Cyber Safety segments was a tailwind.

Symantec Corporation Price and EPS Surprise

Symantec Corporation Price and EPS Surprise

Symantec Corporation price-eps-surprise | Symantec Corporation Quote

Factors at Play

Symantec’s fiscal second-quarter earnings are likely to have benefited from the company’s efforts to strengthen its products suite. Rising demand for cybersecurity products, given the data breaches, might have been a key driver.

Moreover, higher partner revenues and solid subscription revenues are expected to have aided its Consumer Cyber Safety business in the fiscal second quarter.

Improving ARPU, on the back of successful cross-sell and improvement in retention rate for its direct customer base, is likely to have been a tailwind for the Consumer Cyber Safety business.

Management expects revenues from this segment to be between $590 million and $605 million. The Zacks Consensus Estimate for the same stands at $604 million, indicating 0.5% growth from the year-ago reported number.

In the last reported quarter, the company announced that it has entered into a definitive agreement to sell its Enterprise security business to Broadcom AVGO.

Broadcom’s acquisition of the Enterprise business, which includes the Integrated Cyber Defense Platform, didn’t close till after the end of the fiscal second quarter. Therefore, Symantec is expected to have benefited from Integrated Cyber Defense Platform, which drives significant cross-sell and up-sell opportunities.

Management expects revenues from this segment to range between $565 million and $600 million. The Zacks Consensus Estimate for the same stands at $581 million, indicating 1.2% growth.

Moreover, disciplined cost management is expected to have boosted margins in the quarter to be reported.

However, increased investment in direct customer acquisition programs is likely to have been an overhang on margins.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Symantec this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Symantec carries a Zacks Rank #3 and 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 to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Hewlett Packard Enterprise Company HPE has an Earnings ESP of +8.70% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zillow Group, Inc. ZG has an Earnings ESP of +5.09% and a Zacks Rank of 3.

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