What's In Store For Fortinet (FTNT) This Earnings Season?
Zacks Investment Research | Apr 24, 2017 09:04PM ET
Fortinet Inc. (NASDAQ:FTNT) is set to report first-quarter 2017 results on Apr 27. Last quarter, the company posted a remarkable positive earnings surprise of 125%. Notably, Fortinet has outperformed the Zacks Consensus Estimate thrice and missed in one occasion, over the trailing four quarters. It has an average negative earnings surprise of 47.92%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Fortinet’s network security solutions include firewall, VPN, application control, antivirus, intrusion prevention, web filtering, anti-spam and WAN acceleration.
For the last two quarters, there has been a slowdown in Fortinet’s sales. The company observed that organizations have been breaking their cybersecurity investment plans into phases and implementing the same over longer periods of time instead of making a single large investment. Therefore, the aforementioned factor is likely to affect the to-be-reported quarter revenues.
Nonetheless, we opine that Fortinet’s initiative to change its business model to subscription-based service provider will continue to drive the company’s bottom-line results. Subscription-based service is a high gross margin business (approximately 80%) compared with the hardware-centric model.
Notably, the company generates over 50% of the total revenue from these services, which helped it generate a 250 basis points gross margin expansion in fourth-quarter 2016. We believe that the strategy will continue to improve the company’s bottom-line performances.
Fortinet, Inc. Price and EPS Surprise
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