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What's in the Cards for Check Point (CHKP) in Q4 Earnings?

Zacks Equity Research
Updated

Check Point Software Technologies Ltd. CHKP is set to report fourth-quarter 2016 results on Jan 19. Last quarter, the company posted a positive earnings surprise of 4.12%. Notably, Check Point Software has outperformed the Zacks Consensus Estimate thrice while matching the same once in the trailing four quarters. It has an average positive earnings surprise of 3.55%.

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

Factors to Consider

We believe that Check Point Software will continue to benefit from strong demand for cybersecurity solutions. Note that the financial well-being, brand image and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.

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With rapid technological advancement, organizations are increasingly adopting the “bring your own device” (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.

Moreover, various independent research firms had forecasted strong demand in 2016. Gartner had forecasted that worldwide Information Security Spending would reach $81.6 billion in 2016, marking year-over- year growth of 7.9%.

We believe that Check Point Software must have capitalized on this opportunity and this may well be reflected in the company’s results in the to-be reported quarter.

Furthermore, the rapid adoption of Check Point’s data center appliances and the continuous enhancements in data center product lines are expected to provide adequate support to revenue growth. Additionally, the company’s continuous share buybacks bode well for investors.

However, competition from Cisco, Juniper Networks and Fortinet FTNT, an uncertain economic environment and currency headwinds remain concerns.

Earnings Whispers

Our proven model does not conclusively show that Check Point Software will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.15. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Check Point Software carries a Zacks Rank #1. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Check Point Software Technologies Ltd. Price and EPS Surprise

Check Point Software Technologies Ltd. Price and EPS Surprise | Check Point Software Technologies Ltd. Quote

Stocks to Consider

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Seagate Technology Plc STX, with an Earnings ESP of +1.87% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instrument TXN, with an Earnings ESP of +1.24% and a Zacks Rank #2.

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Seagate Technology PLC (STX): Free Stock Analysis Report
 
Fortinet, Inc. (FTNT): Free Stock Analysis Report
 
Check Point Software Technologies Ltd. (CHKP): Free Stock Analysis Report
 
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
 
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