Symantec (SYMC) to Report Q3 Earnings: What's in the Offing?

Symantec Corporation SYMC is scheduled to report third-quarter fiscal 2019 results on Jan 31. The company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 14.17%.

In the last reported quarter, Symantec’s earnings rose 5% year over year to 42 cents, surpassing the Zacks Consensus Estimate of 33 cents.

The company’s revenues, however, decreased 7% to $1.18 billion.  Nonetheless, the top line surpassed the consensus estimate of $1.14 billion.

What to Expect in Q3?

For the fiscal third quarter, Symantec anticipates non-GAAP revenues in the range of $1.16-$1.19 billion,. The Zacks Consensus Estimate stands at $1.18 billion, indicating 2.58% decrease from the year-ago quarter.

Non-GAAP operating margin is projected to be about 30%. Further, management estimates earnings between 37 cents and 41 cents on a non-GAAP basis. The Zacks Consensus Estimate is pegged at 39 cents, indicating a year-over-year decline of 20.41%.

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

Factors at Play

Symantec is gaining from data breaches as demand for cybersecurity-related products continue to shoot up. The company’s continuous efforts to strengthen its product suite are likely to benefit the top line.

The company continues to benefit from Integrated Cyber Defense Platform, which drives significant cross-sell and up-sell opportunities. Moreover, key customer wins for Cloud Proxy, Cloud Access Security Broker and cloud e-mail offerings are expected to be tailwinds.

Moreover, its cost-saving strategy and successful acquisitions of Blue Coat and LifeLock, which primarily drive the Consumer Digital Safety business, are expected to aid earnings.

Also, growth in Consumer Digital Safety segment is a tailwind. Improvement in ARPU (average revenue per user) on the back of successful cross-sell, and better retention rate for its direct customer base are key positives.

However, the Equifax breach in the year-ago quarter had led to a very strong quarter for the Consumer Digital Safety segment, which is expected to lead to tough year-over-year comparisons. Notably, management expects the consumer business to grow 1% in the fiscal third quarter.

Moreover, the Enterprise Security segment continues to display weakness due to decreased billings. The company expects continuation of longer sales cycle to negatively impact Enterprise Security revenues.

Per management, fiscal third and fiscal fourth quarters are seasonally biggest for the Enterprise business. However, a healthy pipeline supported by the seasonality has likely been more than offset by a loss of momentum faced by the segment in the first two fiscal quarters due to a decline in implied billings. This is expected to lead to an organic decline of 4.5% for the Enterprise business in the to-be-reported quarter.

Also, the acquisitions of Appthority and Javelin in third-quarter fiscal 2019 are expected to lower cash and cash equivalents.

Furthermore, increased competition from the likes of FireEye FEYE, Fortinet FTNT and Qualys QLYS poses a major headwind for the company.

Symantec Corporation Price and EPS Surprise

Symantec Corporation Price and EPS Surprise | Symantec Corporation Quote

Symantec currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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