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Fortinet (FTNT) Stock Gains on Q1 Earnings Beat, Upbeat Guidance
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Fortinet Inc. (FTNT - Free Report) stock appreciated 2.6% during Thursday’s extended trading session after the cybersecurity firm reported better-than-anticipated first-quarter 2021 results and raised the full-year outlook.
Fortinet delivered first-quarter non-GAAP earnings per share of 81 cents, beating the Zacks Consensus Estimate of 74 cents. The reported figure also improved significantly from the year-ago quarter’s earnings of 60 cents per share.
Moreover, revenues of $710.3 million surpassed the consensus mark of $678.9 million and increased 23% year over year. This top-line growth was driven by advanced FortiGate technology with SPU, integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, efforts to expand into adjacent addressable markets and boost the firm’s global sales force aided the company’s quarterly performance.
Segment wise, Product revenues jumped 25.2% year over year to $240.7 million. This uptick was supported by the continued adoption of the FortiGate-based secure SD-WAN solution. Services revenues climbed 21.8% to $469.6 million, chiefly on strong demand for fabric and cloud security solutions.
Billings were up 27.4% to $850.6 million on solid execution and growth across all regions.
Geographically, the APAC region registered the highest revenue growth with a 26% increase, followed by the EMEA’s 25%, and then the Americas’ (including Latin America) 20%.
During the March-end quarter, the company secured 66 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth, in terms of the number of deals worth more than $1 million. Secure SD-WAN accounted for 15 of the large deals won during the first quarter.
Margins
Gross margin expanded 10 basis points (bps) year on year to 78.9% during the January-March quarter. Product gross margin advanced 120 bps to 62.6% during this period, primarily on lower direct product cost.
Non-GAAP operating income jumped 34.6% to $173.9 million in the reported quarter, while non-GAAP operating margin expanded 210 bps to 24.5%.
Balance Sheet & Cash Flow
Fortinet exited the first quarter with cash and cash equivalents, and short-term investments of $2.94 billion, up from the $1.84 billion reported at the end of the previous quarter. This increase was led by the issuance of a $1-billion investment grade debt during the first quarter.
During the January-March period, the company generated operating cash flow of $315.9 million compared with the year-ago quarter’s $319.4 million. Free cash flow was $263.8 million compared with the $214.8 million witnessed in the first quarter of 2020.
Notably, in July 2020, the company had increased its share-repurchase authorization by $500 million to $3 billion. At the end of first-quarter 2021, it had $1 billion left under the ongoing authorization which is set to expire in February 2022.
Guidance
Buoyed by the impressive first-quarter performance, the company raised its guidance for full-year 2021. For 2021, Fortinet now forecasts revenues and billings in the band of $3.080-$3.130 billion and $3.685-$3.745 billion, respectively. Previously, it had projected revenues and billings in the range of $3.025-$3.075 billion and $3.560-$3.640 billion, respectively.
Non-GAAP earnings per share are now anticipated to lie between $3.65 and $3.80, up from the earlier guided range of $3.60-$3.75.
However, the company kept its non-GAAP gross and operating margins guidance range unchanged. Non-GAAP gross and operating margin is anticipated in the band of 78-80% and 25-27%, respectively.
For second-quarter 2021, the company estimates revenues of $733-$747 million. Billings are estimated in the band of $860-$880 million.
Non-GAAP earnings per share are projected at 83-88 cents.
Non-GAAP gross margin is expected in the range of 78.5-79.5%, whereas non-GAAP operating margin is anticipated between 24.5% and 25.5%.
Zacks Rank and Key Picks
Fortinet currently carries a Zacks Rank #3 (Hold).
The long-term earnings growth rate for Lam Research, Micron, and NVIDIA is currently pegged at 32.8%, 15.7% and 15.1%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Fortinet (FTNT) Stock Gains on Q1 Earnings Beat, Upbeat Guidance
Fortinet Inc. (FTNT - Free Report) stock appreciated 2.6% during Thursday’s extended trading session after the cybersecurity firm reported better-than-anticipated first-quarter 2021 results and raised the full-year outlook.
Fortinet delivered first-quarter non-GAAP earnings per share of 81 cents, beating the Zacks Consensus Estimate of 74 cents. The reported figure also improved significantly from the year-ago quarter’s earnings of 60 cents per share.
Moreover, revenues of $710.3 million surpassed the consensus mark of $678.9 million and increased 23% year over year. This top-line growth was driven by advanced FortiGate technology with SPU, integrated Security Fabric platform and hybrid multi-cloud offerings.
Strategic investments in developing powerful products and services, efforts to expand into adjacent addressable markets and boost the firm’s global sales force aided the company’s quarterly performance.
Fortinet, Inc. Price, Consensus and EPS Surprise
Fortinet, Inc. price-consensus-eps-surprise-chart | Fortinet, Inc. Quote
Quarter in Detail
Segment wise, Product revenues jumped 25.2% year over year to $240.7 million. This uptick was supported by the continued adoption of the FortiGate-based secure SD-WAN solution. Services revenues climbed 21.8% to $469.6 million, chiefly on strong demand for fabric and cloud security solutions.
Billings were up 27.4% to $850.6 million on solid execution and growth across all regions.
Geographically, the APAC region registered the highest revenue growth with a 26% increase, followed by the EMEA’s 25%, and then the Americas’ (including Latin America) 20%.
During the March-end quarter, the company secured 66 total deals worth equal to or more than $1 million each. Secure SD-WAN continued to be the leading contributor to growth, in terms of the number of deals worth more than $1 million. Secure SD-WAN accounted for 15 of the large deals won during the first quarter.
Margins
Gross margin expanded 10 basis points (bps) year on year to 78.9% during the January-March quarter. Product gross margin advanced 120 bps to 62.6% during this period, primarily on lower direct product cost.
Non-GAAP operating income jumped 34.6% to $173.9 million in the reported quarter, while non-GAAP operating margin expanded 210 bps to 24.5%.
Balance Sheet & Cash Flow
Fortinet exited the first quarter with cash and cash equivalents, and short-term investments of $2.94 billion, up from the $1.84 billion reported at the end of the previous quarter. This increase was led by the issuance of a $1-billion investment grade debt during the first quarter.
During the January-March period, the company generated operating cash flow of $315.9 million compared with the year-ago quarter’s $319.4 million. Free cash flow was $263.8 million compared with the $214.8 million witnessed in the first quarter of 2020.
Notably, in July 2020, the company had increased its share-repurchase authorization by $500 million to $3 billion. At the end of first-quarter 2021, it had $1 billion left under the ongoing authorization which is set to expire in February 2022.
Guidance
Buoyed by the impressive first-quarter performance, the company raised its guidance for full-year 2021. For 2021, Fortinet now forecasts revenues and billings in the band of $3.080-$3.130 billion and $3.685-$3.745 billion, respectively. Previously, it had projected revenues and billings in the range of $3.025-$3.075 billion and $3.560-$3.640 billion, respectively.
Non-GAAP earnings per share are now anticipated to lie between $3.65 and $3.80, up from the earlier guided range of $3.60-$3.75.
However, the company kept its non-GAAP gross and operating margins guidance range unchanged. Non-GAAP gross and operating margin is anticipated in the band of 78-80% and 25-27%, respectively.
For second-quarter 2021, the company estimates revenues of $733-$747 million. Billings are estimated in the band of $860-$880 million.
Non-GAAP earnings per share are projected at 83-88 cents.
Non-GAAP gross margin is expected in the range of 78.5-79.5%, whereas non-GAAP operating margin is anticipated between 24.5% and 25.5%.
Zacks Rank and Key Picks
Fortinet currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Lam Research Corporation (LRCX - Free Report) , Micron (MU - Free Report) and NVIDIA (NVDA - Free Report) . While Lam Research and Micron sport a Zacks Rank #1, NVIDIA carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Lam Research, Micron, and NVIDIA is currently pegged at 32.8%, 15.7% and 15.1%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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