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VeriSign (VRSN) to Report Q2 Earnings: What's in Store?

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VeriSign (VRSN) to Report Q2 Earnings: What's in Store?

VeriSign's (VRSN) second-quarter 2018 results are likely to benefit from increasing domain name registration backed by growing Internet usage globally.

VeriSign VRSN is set to report second-quarter 2018 results on Jul 27.

We note that the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 2.00%.

In the last reported quarter, VeriSign’s non-GAAP earnings of $1.07 per share 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.

For the second-quarter of 2018, the Zacks Consensus Estimate for VeriSign’s earnings and revenues is pegged at $1.14 per share and $302 million, respectively, indicating an increase of 8.6% and 4.5% from the year-ago period.

Increased Internet Penetration to Drive Domain Registrations

VeriSign holds a prime position in the highly regulated .com and .net domain industry. The company is the exclusive registrar of the .com, .net and .name domains per its agreements with The Internet Corporation for Assigned Names and Numbers (ICANN).

Per the company’s agreement with ICANN, the annual fee for a .net domain name registration has been increased from $8.20 to $9.02 effective Feb 1, 2018.

Notably, per the company’s latest The Domain Name Industry Brief, domain name registrations across all top-level domains (TLDs) signal a positive trend, increasing 0.4% sequentially to approximately 334 million at the end of the first quarter. Domain name registrations increased 3.2 million or 1% year over year.

On a combined basis, .com and .net domain names increased 3.2% year over year to approximately 148.3 million in the last reported quarter. Reportedly, new .com and .net registrations were 9.6 million compared with 9.5 million in the year-ago quarter.

The year-over-year improvement was primarily driven by increase in domain name registrations in the global market mainly United States, China and Europe.

We believe that the growing need for Internet consumption globally will primarily drive domain names registered with VeriSign. Additionally, renewal of contracts and price hikes for the domain names will continue to drive the company’s top line.

The Zacks Consensus Estimate for active domain names ending .com and .net for the second-quarter stands at 149 million, indicating an increase of 3.5% from the year-ago figure.

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

However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to sales and marketing remain primary headwinds.

VeriSign, Inc. Price and Consensus

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

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

VeriSign has a Zacks Rank #2 and an Earnings ESP of -0.88%. 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 companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

Sirius XM SIRI has a Zacks Rank #2 and Earnings ESP of +6.51%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sabre Corporation SABR is a Zacks Rank #2 stock with an Earnings ESP of +2.37%.

Globant S.A GLOB has a Zacks Rank #2 and Earnings ESP of +1.28%.

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