Symantec (SYMC) Up On Splendid Q1 Earnings, Upbeat FY18 View
Zacks Investment Research | Aug 02, 2017 10:10PM ET
Shares of Symantec Corporation (NASDAQ:SYMC) remained highly volatile during yesterday’s after-hour trade, with the stock surging as much as 6%, but eventually closing trade at a nominal gain of just 0.2%. There were a plenty of reasons which boosted the company’s shares, which includes a better-than-expected first-quarter bottom-line result, upbeat fiscal 2018 revenue guidance and an agreement relating to the sale of its web certificates business.
Notably, Symantec has been clocking solid returns and in the year-to-date period it has gained approximately 29.4%, outperforming 21.3% growth recorded by the industry it belongs to.
First thing first, let’s discuss the quarterly performance.
Quarter in Detail
Symantec’s revenues of $1.175 billion jumped 32.9% year over year and came ahead of its guidance range of $1.133–$1.163 billion (mid-point $1.148 billion). The robust top-line results were mainly driven by strong performance across the company’s Enterprise Security and Consumer Digital Safety segments, as well as benefit from acquisitions and favourable currency exchange rates. However, the figure fell short of the Zacks Consensus Estimate of $1.204 billion.
On non-GAAP basis, the company posted revenues of $1.228 billion, up 39% from $884 million reported in the year-ago quarter. The figure also came in higher than management’s projection of $1.185–$1.215 billion (mid-point $1.20 billion).
Segment wise, the Consumer Security as well as Enterprise Security, both divisions witnessed a 39% year-over-year increase in non-GAAP revenues.
Symantec’s non-GAAP gross profit of $1.032 billion was up 39%, primarily attributable to a higher revenue base. However, as a percentage of revenues, gross margin contracted 20 basis points (bps) on a year-over-year basis to 84%, as the benefit of increased sales was more than offset by higher cost of goods sold.
Furthermore, non-GAAP operating income surged 49% year over year to $377 million while margin improved 210 bps to 30.7%. Moreover, non-GAAP operating margin was higher than the company’s guidance range of 27–29%. The year-over-year increase was mainly driven by strong revenue growth and benefited from better execution of the company’s cost-saving initiatives and synergies from acquisitions.
Per Symantec, it now expects to realize over $580 million of cost savings by the end of fiscal 2018 through its cost-restructuring initiatives and cost synergies from the acquisitions of Blue Coat and LifeLock. The figure is $30 million higher than the company’s previous projection of realizing $550 million of cost savings. Till fiscal 2017, the company has achieved over $300 million in net cost efficiencies.
Non-GAAP net income for the quarter came in at $221 million compared with $177 million recorded in the year-ago quarter. Non-GAAP earnings per share increased 13.8% year over year to 33 cents and came above the company’s projected range of 28–32 cents.
Symantec’s adjusted earnings (excluding all one-time items but including stock-based compensation on proportionate tax basis) came in at 15 cents per share which surpassed the Zacks Consensus Estimate of 12 cents. However, on a year-over-year basis, it plunged 34.8%.
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