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Why Is Check Point (CHKP) Down 3.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Check Point Software (CHKP). Shares have lost about 3.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Check Point due for a breakout? 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 catalysts.

Check Point Q1 Earnings & Revenues Surpass Estimates

Check Point Software Technologies reported strong first-quarter 2022 results, wherein both the top and bottom lines not only topped the respective Zacks Consensus Estimate but also improved year over year.

The IT security solutions provider reported non-GAAP earnings of $1.57 per share, beating the Zacks Consensus Estimate of $1.54. The bottom line improved 2% from the year-ago quarter’s earnings of $1.54 per share.

Check Point’s quarterly revenues increased 7% year over year to $543 million, outpacing the Zacks Consensus Estimate of $534.7 million.

Quarterly Details

Subscription revenues were $201.6 million, climbing 14% year over year on double-digit revenues in CloudGuard and Harmony solutions and a triple-digit sales increase in the Infinity platform.

Products and licenses revenues increased 6.1% year over year to $115.9 million. Products, which are currently in the process of transitioning to cloud solutions, have been included in the subscription line.

Total revenues from product and security subscriptions were $317.5 million, up 10.7% year over year.

Software updates and maintenance revenues increased to $225.2 million from $220.9 million reported in the year-ago quarter.

As of Mar 31, 2022, deferred revenues were $1.67 billion, up 14% year over year.

Non-GAAP operating income for the first quarter of 2022 totaled $239 million, down from $246 million in the year-ago quarter. Non-GAAP operating margin contracted 500 basis points to 44%.

Balance Sheet & Other Details

Check Point exited the first-quarter with cash and cash equivalents, marketable securities and short-term deposits of $3.80 billion compared with the previous quarter’s $3.78 billion.

The company generated cash worth $398 million from operational activities during the first quarter.

It repurchased 2.5 million shares for about $325 million during the first quarter.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -6.5% due to these changes.

VGM Scores

Currently, Check Point has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Check Point has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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