Check Point (CHKP) Tops Q3 Earnings & Revenue Estimates

Check Point Software Technologies (NASDAQ:CHKP) Ltd. CHKP reported third-quarter 2020 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. The company’s non-GAAP earnings per share of $1.64 beat the consensus mark of $1.53. The figure also climbed 14% year over year.

Revenues for the reported quarter came in at $509 million, up 4% year over year. Moreover, the figure exceeded the Zacks Consensus Estimate of $502.5 million. Growth in SaaS and IaaS cloud solutions drove the top line. In addition, work-from-home-related solutions — Mobile Access and Sandblast Agent — continued to witness strong traction.

Quarter Details

Subscription revenues came in at $169 million, increasing 10% year over year, on strong demand for its advanced solutions, primarily CloudGuard, Sandblast Zero-day threat prevention and Infinity solutions. During the third quarter, the company secured several Infinity deals in various industries, including government, telecommunication and industrial.

Revenues of $120.2 million from products and licenses inched up 1.6%. Products are currently in the process of transitioning to cloud solutions, which is included in the subscription line.

Total revenues from product and security subscriptions came in at $289 million, up 6% year over year.

Software update and maintenance revenues inched up to $220 million from the $218.7 million reported in the year-ago quarter.

As of Jun 30, deferred revenues were $1.3 billion, up 5% year over year, reflecting strength in security subscription.

Region wise, the Americas generated 46% of total revenues; Europe, Middle East and Africa accounted for 42%; and the Asia Pacific contributed 12%.

Non-GAAP operating income for the reported quarter came in at $265 million, increasing 7.5% year over year. Non-GAAP operating margin expanded 190 basis points to 52.1%.

Balance Sheet & Other Financial Details

Check Point exited the third quarter with cash and cash equivalents, marketable securities and short-term deposits of $3.90 billion compared with the previous quarter’s $3.96 billion.

The company generated cash worth $248 million from operational activities, down from the previous quarter’s $252 million.

It repurchased 2.7 million shares for about $325 million during the September-end quarter.

Outlook

Check Point has issued the guidance for the fourth quarter. For the ongoing quarter, the company projects revenues between $525 million and $575 million (mid-point (550 million). It forecasts adjusted earnings per share in the range of $1.98 to $2.18 (mid-point $2.09). The Zacks Consensus Estimate for the current-quarter revenues and earnings is pegged at $554.3 million and $2.06 per share, respectively.

Zacks Rank and Stocks to Consider

Check Point currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Zoom Video Communications (NASDAQ:ZM) ZM, salesforce.com, inc. CRM and Sapiens International (NASDAQ:SPNS) Corporation SPNS, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Salesforce (NYSE:CRM) and Sapiens is currently pegged at 25%, 15.7%, and 5%, respectively.

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