Internet security specialist Symantec
What analysts say:
- Buy, sell, or waffle? Thirty-two analysts crowd around Symantec. Thirteen rate the stock a buy, while 19 think it's a hold.
- Revenue. On average, they're looking for sales growth of 12%, $1.53 billion in total.
- Earnings. Profits are predicted to leap 42% to $0.34 per share.
What management says:
Reviewing Symantec's Q3 earnings release, fellow Fool Anders Bylund highlighted the company's "broad international exposure" as one of several factors contributing to the company's 25% earnings growth on just 15% growth in revenue. For his part, Symantec CEO John Thompson mentioned the fact that Symantec gets more than 50% of its revenue from countries using something other than the U.S. dollar as their legal tender, but did not go into detail on the beneficial effects of exchange rates on the company's operations. Rather, he highlighted "operational improvements and product quality," and a record 554 "large deals" signed during the quarter, including with marquee names such as Coca-Cola and eBay
Peering into the future, Thompson predicted we will see Symantec earn GAAP (not the pro forma estimate cribbed by the analysts above) profits of $0.34 this quarter, and a total of $0.47 by year-end. If Symantec hits those targets, I'll bet the continued weakness of the U.S. dollar has more than a little to do with it.
What management does:
Which is not to say "operational improvements" played no role. Symantec's rolling gross margins have marched steadily upward over the past year. The net stabilized, while operating margins turned around last quarter. Relative to the competition, Symantec is pulling down operating margins superior to those of McAfee
|
9/06 |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 |
|
|---|---|---|---|---|---|---|
|
Gross |
83.6% |
83.3% |
83.2% |
83.4% |
83.9% |
84.7% |
|
Operating |
12.8% |
12.8% |
11.4% |
11% |
10.8% |
11.6% |
|
Net |
8.9% |
9.1% |
7.8% |
7.5% |
5.9% |
5.9% |
One Fool says:
Over on the Motley Fool Inside Value scorecard, our May 2006 recommendation of Symantec continues to outperform the market's performance, if only just barely. Although our team of deep-value treasure hunters continues to entertain hopes of truly crushing the market averages, their January update on the company's performance didn't exactly reek of confidence:
... [W]e're still concerned about Symantec's ability to make its acquired parts act as a whole and achieve coincident cost-savings. The strategic rationale for its acquisitions -- to act as an integrated purveyor of security and data solutions -- make good sense, but so far it's proved hard to accomplish in practice. ... [W]e're also quick to acknowledge the company's been in almost perpetual restructure since the July 2005 Veritas acquisition, which gives smart Fools pause.
That said, our team continues to term the shares "cheap," and, for the record, I agree. Selling for just 10 times trailing free cash flow, and expected by most analysts to grow at about 11% per year over the next half decade, Symantec shares look priced to move.
What did we expect out of Symantec last quarter, and what did we get? Read all about it in:
