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Why Is FireEye (FEYE) Down 5.2% Since Last Earnings Report?

Zacks Equity Research
·3 min read

A month has gone by since the last earnings report for FireEye (FEYE). Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is FireEye 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.

FireEye's Q2 Earnings Beat Estimates, 2020 View Up

FireEye reported better-than-expected results for second-quarter 2020. The company’s second-quarter non-GAAP earnings came in at 9 cents per share, while the Zacks Consensus Estimate was pegged at a loss of 2 cents. FireEye’s quarterly earnings also witnessed significant improvement from the year-ago quarter’s loss of a penny.

Revenues increased 6% year over year to $230 million and surpassed the consensus mark of $214.6 million. FireEye’s overall quarterly results benefited from increased demand for cybersecurity solutions amid the coronavirus-induced work-and-learn-from-home trend.

Quarter Details

Segment wise, product, subscription and support revenues increased 2.5% year over year to $177.3 million and revenues from professional services were up 20.9% year over year to $52.6 million.

However, FireEye’s on-premise product and related business revenues decreased 12% year over year. This resulted from the fall in appliance hardware sales in 2016 and 2017, which is still being realized due to the ASC 606 revenue accounting standards.

Quarterly billings of $203 million slid 8% year over year. The decline reflects strong year-over-year comparison and a large government contract booked in second-quarter 2019.

Non-GAAP gross margin remained flat year over year at 72%. Non-GAAP operating margin was 10%.

Balance Sheet & Cash Flow

FireEye exited the second quarter with cash and cash equivalents, and short-term investments of approximately $914 million, down from the previous quarter’s $980 million.

The company generated operating cash flow of $15 million in the June-end quarter. In the March-end quarter, FireEye’s cash outflow from operations was $24 million.

Guidance

For third-quarter 2020, FireEye anticipates revenues between $225 million and $229 million. The Zacks Consensus Estimate for revenues currently stands at $220.1 million, calling for a 2.6% year-over-over decline.

The company anticipates non-GAAP gross margin of 70-71%. Non-GAAP operating margin is estimated to be between 7.5% and 8.5%. FireEye expects non-GAAP earnings in the band of 6 cents to 8 cents.

Buoyed by better-than-expected second-quarter results, the company raised the outlook for full-year 2020. FireEye now anticipates revenues in the $905-$925 million band, up from the earlier projection of $880-$900 million. It also expects non-GAAP earnings between 22 cents and 26 cents, much higher than the previously-estimates range of 3-7 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 49.28% due to these changes.

VGM Scores

Currently, FireEye has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise FireEye has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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