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Check Point (CHKP) Q4 Earnings Top, Revenues Meet Estimates

Zacks Equity Research

Check Point Software Technologies Ltd. CHKP reported fourth-quarter 2019 results, wherein the bottom line beat and the top line came in line with the Zacks Consensus Estimate.

The company’s non-GAAP earnings per share of $2.02 beat the consensus mark by 1.5%. The figure came within the company’s guidance of $1.93-$2.04 and climbed 21% year over year, driven mainly by higher revenues and lower share count.

Revenues were $544 million, up 3% year over year. The figure came within the company’s guidance of $527-$557 million.

Growth in security subscriptions revenues, including CloudGuard suite of products and Infinity deals, boosted the top line.

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise

Check Point Software Technologies Ltd. Price, Consensus and EPS Surprise

Check Point Software Technologies Ltd. price-consensus-eps-surprise-chart | Check Point Software Technologies Ltd. Quote

Quarter Details

Security subscription revenues came in at $163.7 million, increasing 11.6% year over year, aided by strong demand for its next-generation threat extraction and protection, CloudGuard and Infinity solutions. However, revenues of $157.9 million from Products and licenses fell 1.7%.

Total revenues from product and security subscriptions totaled $321.6 million, growing 4.7% year over year.

Software updates and maintenance revenues increased to $222.2 million, up 1.8%.

As of Dec 31, 2019, deferred revenues were $1.01 billion, up 3.23% year over year, reflecting strength in security subscription and support.

Region wise, the Americas generated 4% of total revenues, Europe, Middle East and Africa accounted for 4%, and the Asia Pacific accounted for 1%.

The company continued to witness strong traction of its high-end 16000 and 26000 security appliances, which are optimized for Gen 5 security operations. It also launched the Maestro Orchestrator, which delivers cloud-like elasticity and reliability to data centers.

Check Point also significantly increased its marketing activities in the region during the quarter.

Operating Results

Non-GAAP operating income for the reported quarter came in at $280 million, increasing 0.4% year over year. Non-GAAP operating margin contracted 200 basis points to 51%, as a result of weakened currencies, including the Israeli Shekel, creating a headwind of $4 million.

Balance Sheet & Other Financial Details

Check Point exited the fourth quarter with cash and cash equivalents, marketable securities and short-term deposits of $1.58 billion compared with the previous quarter’s $1.68 billion.

The company generated cash worth $246.4 million from operational activities, up from the third quarter’s $244 million.

It repurchased approximately 2.9 million shares for about $325 million in the fourth quarter.

Full-Year 2019 Highlights

Revenues for the full year came in at $2 billion, up 4% year over year.

Non-GAAP earnings of $6.13 climbed 7% year over year.

Outlook

The company intends to continue shifting its revenues from products to subscriptions and Infinity.

Furthermore, for the first quarter of 2020, revenues are expected to be between $475 million and $495 million, and non-GAAP earnings in the $1.37-$1.43 range.

Zacks Rank & Key Picks

The company currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are CEVA, Inc. CEVA, SYNNEX SNX and Silicon Motion Technology Corporation SIMO, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for CEVA, SYNNEX and Silicon Motion is currently pegged at 20%, 10.37% and 7%, respectively.

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