It has been about a month since the last earnings report for Check Point Software (CHKP). Shares have added about 0.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Check Point due for a pullback? 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 drivers.
Check Point’s Q4 Earnings & Revenues Beat Estimates
Check Point Software Technologies reported strong fourth-quarter 2022 results, wherein both the top and bottom lines surpassed the respective Zacks Consensus Estimate and improved year over year.
The IT security solutions provider reported non-GAAP earnings of $2.45 per share, beating the Zacks Consensus Estimate of $2.35. The bottom line increased 9% from the year-ago quarter’s earnings of $2.25 per share.
Check Point’s quarterly revenues climbed 7% year over year to $638 million, outpacing the Zacks Consensus Estimate of $633.6 million. This upside was driven by double-digit growth in product and subscription revenues.
Security subscription revenues were $231 million, increasing 13% year over year on double-digit revenue growth in Quantum, CloudGuard and Harmony solutions.
Products and licenses revenues increased 4.2% year over year to $173.4 million. Products, which are currently in the process of transitioning to cloud solutions, have been included in the subscription line.
Total revenues from product and security subscriptions were $404.4 million, up 9.1% year over year.
Software updates and maintenance revenues increased to $234.1 million from $228.6 million reported in the year-ago quarter.
As of Dec 31, 2022, deferred revenues were $1.88 billion, up 10% year over year.
Non-GAAP operating income for the fourth quarter of 2022 totaled $289 million, up from $285 million in the year-ago quarter. Non-GAAP operating margin contracted 200 basis points to 45%.
Balance Sheet & Other Details
Check Point exited the fourth quarter with cash and cash equivalents, marketable securities and short-term deposits of $3.50 billion compared with the previous quarter’s $3.57 billion.
The company generated cash worth $230 million and $1.08 billion from operational activities during the fourth quarter and full year 2022.
It repurchased 2.6 million shares for about $325 million during the reported quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Check Point has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Check Point has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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