Will Check Point Software (CHKP) Miss Earnings Estimates? - Analyst Blog

Check Point Software Technologies Ltd. CHKP is slated to report its first-quarter 2014 results, before the opening bell, on Apr 29, 2014.

Last quarter, the company delivered a positive 3.37% earnings surprise. Let's see how things are shaping up for the company prior to the announcement.

Factors to Consider this Past Quarter

Check Point delivered better-than-expected fourth-quarter results, which topped the Zacks Consensus Estimate on both counts primarily driven by growth across its software and data center applications.

We remain encouraged by rapid adoption of Check Point's data center appliances and threat detecting solutions. Moreover, the recent partnership with VMware VMW, to make the cloud-computing environment more secure and efficient, bodes well for the company. Additionally, the company's share buy pack plan will supports the bottom line.

However, stiff competition from peers and an uncertain economic environment remain the concerns.

Earnings Whispers?

Our proven model does not conclusively show that Check Point Software is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, this is not the case here as elaborated below.

Negative Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. The Most Accurate estimate stands at 76 cents while the Zacks Consensus Estimate is higher at 78 cents resulting in an ESP of -2.56%.

Zacks Rank: Check Point's Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.

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

Other Stocks to Consider

ON Semiconductor Corp. ONNN has an Earnings ESP of +6.67% and a Zacks Rank #1 (Strong Buy).

Level 3 Communications, Inc. LVLT has an Earnings ESP of +10.71% and a Zacks Rank #1.