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VeriSign (VRSN) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

VeriSign VRSN is set to report fourth-quarter 2018 results on Feb 7.

The company has delivered average four-quarter positive earnings surprise of 1.7%. In the last reported quarter, VeriSign's earnings of $1.23 per share topped the Zacks Consensus Estimate of $1.19. The figure increased 23% from the year-ago quarter.

Revenues increased 4.6% year over year to $306 million and came slightly ahead of the Zacks Consensus Estimate of $305 million.

The Zacks Consensus Estimate for fourth quarter earnings has remained steady at $1.21 in the past 30 days. Further, the consensus mark for revenues is pegged at $308.4 million, up roughly 4.4% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q4 Results

VeriSign holds a significant 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).

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. Price and EPS Surprise | VeriSign, Inc. Quote


Per “Amendment 35 to the Cooperative Agreement” between VeriSign and the U.S. Department of Commerce (DOC), signed on Oct 26, 2018, the company can now pursue with ICANN a price increase of up to 7% for .com domain names, in each of the last four years of six-year period of the Registry Agreement. Amendment 35 also extended the expiration of the Cooperative Agreement to Nov 30, 2024.

The amendment is beneficial for VeriSign. The company is expected to benefit from growing Internet consumption globally. For the fourth quarter, VeriSign projects domain name base registration to increase 0.9-1.4 million.

Notably, domain name registrations increased 2.6 million or 0.8% sequentially to 342.4 million across top-level domains (TLDs) in third-quarter 2018.

However, growth rate slowed down in the third quarter. Notably, in the second quarter, domain name registrations increased 6 million or 1.8% sequentially. This sluggishness is likely to hurt VeriSign’s top-line growth. Moreover, increase in marketing expenses is expected to keep margins under pressure in the to-be-reported quarter.

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 #3, but its Earnings ESP is 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 companies, which, per our model, have the right combination of elements to post earnings beat this quarter:

Gogo GOGO has an Earnings ESP of +9.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square SQ has an Earnings ESP of +6.06% and a Zacks Rank #2.

Vipshop Holdings VIPS has an Earnings ESP of +5.26% and a Zacks Rank #2.


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