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VeriSign (VRSN) Up 6% Since Earnings Report: Can It Continue?

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American Express (AXP) Beats Q3 Earnings and Revenue Estimates

American Express (AXP) delivered earnings and revenue surprises of 5.62% and 1.10%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for VeriSign, Inc. VRSN. Shares have added about 6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is VRSN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

VeriSign reported non-GAAP earnings per share of $1.07 for the first quarter of 2018, which beat the Zacks Consensus Estimate by a penny and increased 11.5% from the year-ago quarter.

Revenues increased 3.7% year over year to $299.3 million and came slightly ahead of the Zacks Consensus Estimate of $298 million. The year-over-year improvement was primarily driven by increase in domain name registrations in the global market mainly U.S., China and Europe.

Management noted that growing penetration of Internet and sustained growth of e-commerce  were the key growth drivers.

Quarter Details

In the quarter, domain name registrations for .com and .net together grew 3.2% year over year to 148.3 million. Domain name base increased 1.91 million in the quarter.

VeriSign processed 9.6 million new domain name registrations for .com and .net, an increase from 9.5 million processed in the year-ago quarter.

Per management, during the quarter, 59% of the revenues came from U.S. customers while international customers contributed the rest.

For the reported quarter, the exact renewal rate figures will be available after 45 days from Mar 31, 2018. The company estimates it to be 74.9%.

Margins

VeriSign reported non-GAAP operating income of $198.4 million compared with $187.8 million in the prior-year quarter. The company’s non-GAAP operating margin was 66.3 % in the quarter, up 120 basis points (bps) from the prior-year quarter.

Non-GAAP adjusted EBITDA was $218.2 million, up 7.2% from the year-ago quarter.

Other Financial Details

As of Mar 31, 2018, the company’s cash and cash equivalents (including marketable securities) were approximately $2.36 billion compared with $2.41 billion as of Dec 31, 2017.

Operating cash flow in the quarter was approximately $89.99 million while free cash flow came in at $82 million.

VeriSign repurchased 1.1 million shares for $125 million in the quarter.

Outlook

For fiscal 2018, VeriSign now expects revenues in the range of $1.200-$1215 billion, compared with the earlier guidance of $1.195-$1.215 billion. Management noted that the revenue guidance does not take into consideration .web top-level domain as it is still uncertain whether the operation of .web will commence this year.

Non-GAAP operating margin is expected to be in the range of 65.5%-66.5%.

Capital expenditure is anticipated to increase in the range of $45-$55 million.

VeriSign also provided domain name base growth rate guidance for 2018. The company now anticipates the same to grow between 2.5-3.25%, up from the prior guidance of 2-3%.

For the second quarter, VeriSign projects domain name base registration to increase in the range of 0.7 million to 1.2 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

VeriSign, Inc. Price and Consensus

 

VeriSign, Inc. Price and Consensus | VeriSign, Inc. Quote

VGM Scores

At this time, VRSN has a subpar Growth Score of D. Its Momentum is doing a lot better with a B. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

VRSN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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