Zoom Stock – Fortinet (FTNT) Beats on Q2 Earnings & Revenues, Raises ’21 Guidance
Fortinet Inc. FTNT delivered second-quarter non-GAAP earnings per share of 95 cents, beating the Zacks Consensus Estimate of 86 cents. The reported figure also improved significantly from the year-ago quarter’s earnings of 82 cents per share.
Moreover, revenues of $801.1 million topped the consensus mark of $741.8 million and increased 30% year over year as well. 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 41% year over year to $298.3 million. This uptick was supported by the continued adoption of the FortiGate-based secure SD-WAN solution, as well as strong revenue growth at non-FortiGate products and increased demand for integrated security fabric products.
Services revenues climbed 24% to $502.8 million.
Billings were up 35% to $960.9 million on solid execution and growth across all regions.
Geographically, the EMEA region registered the highest top-line growth with a 34% increase, followed by the Americas’ 29%, and then the APAC’s 24%.
During the June-end quarter, the company secured 79 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 19 of the large deals won during the reported quarter.
Gross margin shrunk 140 basis points (bps) year on year to 76.7% during the April-June period. This reflects a contraction of 160 bps in Services gross margin, which more than offset the benefit from the 70-basis point expansion in Product gross margin.
Non-GAAP operating income jumped 19.4% to $203.3 million in the reported quarter, while non-GAAP operating margin contracted 220 bps to 25.4%.
Balance Sheet & Cash Flow
Fortinet exited the second quarter with cash and cash equivalents, and short-term investments of $3.11 billion, up from the $2.94 billion reported at the end of the previous quarter.
During the April-June period, the company generated operating and free cash flow of $418.2 million and $394.7 million, respectively. During the first half of 2021, it generated operating cash flow of $734.1 million.
Notably, in July 2020, the company had increased its share-repurchase authorization by $500 million to $3 billion. At the end of second-quarter 2021, it had $921million left under the ongoing authorization, which is set to expire in February 2022.
Buoyed by the impressive second-quarter performance, the company raised its guidance for full-year 2021. For 2021, Fortinet now forecasts revenues and billings in the band of $3.21-$3.25 billion and $3.87-$3.92 billion, respectively. Previously, it had projected revenues and billings in the range of $3.080-$3.130 billion and $3.685-$3.745 billion, respectively.
Non-GAAP earnings per share are now anticipated to lie between $3.75 and $3.90, up from the earlier guided range of $3.65-$3.80.
However, the company lowered its non-GAAP gross and kept the operating margins guidance range unchanged. Non-GAAP gross is now estimated to be in the range of 77-79%, down from the previous forecast of 78-80%. Operating margin is still anticipated to be in the band of 25-27%.
For third-quarter 2021, the company estimates revenues of $800-$815 million. Billings are estimated in the band of $940-$960 million.
Non-GAAP earnings per share are projected at 90-95 cents.
Non-GAAP gross margin is expected in the range of 77.5-78.5%, whereas non-GAAP operating margin is anticipated between 24.5% and 25.5%.
Zacks Rank and Other Stocks to Consider
Fortinet currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector include Digital Turbine APPS, Zoom Video Communications ZM and Salesforce CRM. While Digital Turbine and Zoom sport a Zacks Rank #1 (Strong Buy), Salesforce carries a Zacks Rank of 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 Digital Turbine, Zoom and Salesforce is currently pegged at 50%, 16.6% and 18.4%, respectively.
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