Symantec (SYMC) To Report Q2 Earnings: What To Expect?

Symantec Corp. (NASDAQ:SYMC) is set to report second-quarter fiscal 2017 results on Nov 3. Last quarter, the company posted a positive earnings surprise of 15.00%. Notably, the stock has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 6.07%.

Let us see how things are shaping up for this announcement.

Factors to Consider

Of late, Symantec’s top and bottom lines have been under pressure due to persistent weakness in PC sales, which particularly hurt its core Norton Anti-virus software business. Apart from this, intensifying competition from Palo Alto Networks, FireEye Inc. and Check Point Software has also been eroding its market share in the enterprise segment.

As a result, the company has been singularly focused on restructuring its business. On Jan 29, 2016, Symantec closed the sale of the Veritas business to Carlyle Group (NASDAQ:CG) for $7.4 billion. We believe that the deal provided Symantec with much needed funds to continue expanding its product portfolio as well as its presence in the fast growing markets.

Symantec also completed the acquisition of Blue Coat, which has enabled it to reduce dependence on the PC market and strengthen its position in the enterprise security space. Revenues from the enterprise security segment are now expected to contribute 62% to the company’s top line.

It seems that the aforementioned restructuring initiatives have already been reaping benefits as reflected by the company’s first-quarter fiscal 2017 results, wherein both earnings and revenues outperformed estimates.

Furthermore, Symantec had raised the revenue guidance to the range of $4.040–$4.120 billion from its previous projection of $3.49–$3.58 billion, while the non-GAAP earnings forecast was raised to $1.08–$1.14 from $1.06–$1.10 per share.

We expect the restructuring initiatives and acquisitions to positively impact the company’s to-be-reported quarter’s results.

Nonetheless, continued investments to launch new and innovative products could impact margins in the near term. Also, competition from the likes of Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) , and smaller companies like Kaspersky, which are consistently launching comparable and competitive products, poses a concern.

Earnings Whispers

Our proven model does not conclusively show that Symantec will beat earnings 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. But that is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Symantec is 0.00%. This is because the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 15 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Symantec’s Zacks Rank #2, when combined with its 0.00% ESP, makes surprise prediction difficult.

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

Stocks to Consider

Here are a couple of stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Stratasys Ltd. (NASDAQ:SSYS) , with an Earnings ESP of +41.67% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Asure Software Inc. (NASDAQ:ASUR) , with an Earnings ESP of +14.29% and a Zacks Rank #2.

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