Shares of cybersecurity company Symantec (NLOK -2.77%) rose 18.1% in August, according to data provided by S&P Global Market Intelligence, driven by a strong earnings report and a handful of analyst upgrades.
Symantec reported first-quarter revenue of $884 million, down 3% year over year but about $7 million higher than the average analyst estimate. The consumer security segment generated $403 million of revenue, down 6.3% year over year, while the enterprise security segment produced $481 million, flat compared to the prior-year period.
Non-GAAP earnings per share came in at $0.29, up from $0.26 during the prior-year period and $0.04 higher than analysts expected. GAAP EPS rose 29% to $0.22, despite the decline in revenue. Cost-cutting was the main driver of earnings growth, with GAAP operating expenses declining by 6% year over year.
Following Symantec's first-quarter report, positive analyst commentary helped to further drive up the stock price. Both Goldman Sachs and Morgan Stanley initiated coverage, rating the stock a " buy" and "overweight," respectively, with price targets of $26 and $27. Consolidation in the industry and the company's acquisition of Blue Coat earlier this year were factors driving the bullish price targets. A few days later, Citigroup upgraded the stock from "neutral" to "buy," attaching a price target of $26.50.
The Blue Coat acquisition should have a meaningful impact on Symantec's results going forward. The acquired company produced nearly $600 million of revenue in the fiscal year ending in April, along with a non-GAAP operating margin of 22%. Symantec expects to wring out $150 million of cost synergies from the acquisition, in addition to $400 million of additional cost savings from a previously announced plan.
Despite a revenue decline during the first quarter, improved profitability and a spate of analyst upgrades propelled the stock higher in August.