Check Point Software Technologies Ltd. (CHKP) is set to report fourth-quarter fiscal 2014 results on Jan 29. Last quarter, the company posted a positive earnings surprise of 1.2%. It is worth noting that Check Point has outperformed the Zacks Consensus Estimate in three out of the four preceding quarters with an average positive earnings surprise of 1.5%. Let us see how things are shaping up for this announcement.
Factors to Consider
Check Point delivered better-than-expected third-quarter results. Also, both earnings and revenues compared favorably on a year-over-year basis, primarily due to an increase in revenues from Products & Software Blades and improvement in Software Updates and maintenance revenues.
Check Point also witnessed higher adoption of its Application Control, Anti-Bot and URL Filtering blades coupled with higher demand for its data center and high-end appliances. Another factor that contributed to the overall growth was the increasing number of large deal signings.
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.
Moreover, Check Point’s settlement with the Israeli tax authorities is a long-term positive. The company’s continuous share buybacks bode well for investors.
However, competition from Cisco Systems Inc., Juniper Networks Inc. and Fortinet Inc.; an uncertain economic environment, competitive pressure, currency headwinds and Check Point’s significant European exposure are concerns.
Earnings Whispers?
Our proven model does not conclusively show that Check Point will beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 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 98 cents. Hence, the difference is 0.00%.
Zacks Rank: Check Point’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Expedia Inc. (EXPE) with Earnings ESP of +3.49% and a Zacks Rank #1 (Strong Buy)
The Boeing Company (BA) with Earnings ESP of +1.44% and a Zacks Rank #2 (Buy)
Cognizant Technology Solutions Corporation (CTSH) with Earnings ESP of +1.70% and a Zacks Rank #2
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