Symantec (SYMC) Stock Down On Q4 Earnings & Sales Miss

Shares of Symantec Corporation (NASDAQ:SYMC) fell nearly 3.5% during yesterday’s after-hours trading session after the company announced lower-than-expected results for the fourth quarter of fiscal 2016. A cautious outlook further raised investor concerns.

Quarter in Detail

The company’s adjusted earnings (excluding amortization, restructuring and other one-time items but including stock-based compensation) of 16 cents per share missed the Zacks Consensus Estimate of 18 cents. On a year-over-year basis too, adjusted earnings plunged about 58%.

On a GAAP basis, Symantec reported a loss of $1.56 per share. In the year-ago quarter, the company had earned a profit of 8 cents per share. The year-over-year decline was mainly due to lower revenues and higher expenses.

Moreover, Symantec’s revenues of $873 million missed the Zacks Consensus Estimate of $879 million and declined 2.9% year over year. Last month, the company had revealed that during the fiscal fourth-quarter, revenues suffered as “a shift in enterprise security customer buying preferences is resulting in less license revenue during the quarter and more revenue being deferred to future periods.” Apart from this, unfavorable exchange rates impacted the top line by $3 million.

Segment-wise, License revenues plunged 37% year over year, while Content, Subscription and Maintenance revenues dropped 5%.

The company’s realigned business segments include Consumer Security and Enterprise Security. The Consumer Security segment witnessed a 7% year-over-year decline in revenues, while revenues at Enterprise Security fell 5%.

Symantec’s adjusted gross profit (excluding amortization, restructuring and other one-time items but including stock-based compensation) of $7732 million was down 5.2%, primarily due to a lower revenue base and higher cost of goods sold. Consequently, as a percentage of revenues, gross margin was down 210 basis points (bps) on a year-over-year basis to 83.5%.

Adjusted operating margin (excluding amortization, restructuring and other one-time items but including stock-based compensation) was down 850 bps year over year to 19.5%, primarily due to lower revenues and increased expenses as a percentage of revenues.

Balance Sheet & Cash Flow

Symantec exited the quarter with cash, cash equivalents and short-term investments of $5.983 billion, compared with $2.269 billion last quarter. Long-term debt was $2.207 billion, up from $1.746 billion in the previous quarter.

In fiscal 2016, Symantec generated operating cash flow of $838 million. The company paid dividends worth $3.030 billion. Moreover, it spent $1.868 billion for share repurchases.

Guidance

The company provided a tepid outlook for first-quarter fiscal 2017 and the full fiscal year. For fiscal 2017, Symantec expects revenues of $3.49 billion to $3.58 billion (mid-point: $3.535 billion). The Zacks Consensus Estimate is pegged at $3.542 billion.

Non-GAAP operating margin is anticipated in the range of 26.5–27.5%. Non-GAAP earnings per share are expected to be $1.06 to $1.10.

For the first quarter of fiscal 2017, Symantec expects revenues in the range of $865 million to $895 million (mid-point: $880 million). The Zacks Consensus Estimate is pegged at $881 million.

Non-GAAP operating margin is projected in the range of 24.5–26.5%. Management expects non-GAAP earnings per share of 24 cents to 26 cents (mid-point: 25 cents).

Veritas Business Spun Off

During the quarter, the company completed the much awaited divestment of its Veritas business to The Carlyle Group (NASDAQ:CG) for a total consideration of $7.4 billion. Notably, the companies revised the terms of the deal in this January, when the total consideration amount was reduced to $7.4 billion from $8 billion. (Read: Zacks Investment Research

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Written By: Zacks Investment Research