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Why Symantec (SYMC) Declined Over 12% in the Last 10 Days?

It has been over 10 days since Symantec Corporation SYMC reported fourth-quarter fiscal 2017 results. Following the release, the stock has been witnessing decline.

To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. While better-than-expected results make the stock a good pick, lower-than-expected results dampen investors’ spirit. So, the period following earnings releases is often marked by high market activity.

Shares Plunging

Symantec reported its quarterly numbers on May 10 after the market closed, following which its shares have lost over 12% of its value so far. Nonetheless, the stock has outperformed the Zacks categorized Computer-Software industry in the year-to-date period. Symantec’s shares gained 21.4% in the said period, while the industry’s gain was just 14.7%.

The company’s top- and bottom-line results for the fiscal fourth quarter fell short of the respective Zacks Consensus Estimate. Symantec’s adjusted earnings (excluding deferred revenues fair value, amortization, restructuring and other one-time items but including stock-based compensation) of 5 cents per share came significantly lower than the Zacks Consensus Estimate of 20 cents. On a year-over-year basis also, the figure plummeted 68.8% mainly due to elevated operating expenses which more than offset the benefit of strong revenue growth.

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The company witnessed a 27.7% jump in total revenue, mainly driven by solid performance at the company’s Enterprise Security segment, as well as benefit from the acquisitions of Blue Coat and LifeLock businesses. However, the figure fell short of the Zacks Consensus Estimate of $1.165 billion.

Also, excluding the benefit of the LifeLock acquisition, the company’s revenues came in at $1.076 billion, which was below the mid-point of its guidance of $1.070–$1.090 billion (mid-point: $1.080 billion). Notably, Symantec’s guidance for the fiscal fourth quarter provided on Feb 1 did not include the contribution from the LifeLock acquisition which was completed on Feb 9. LifeLock contributed $100 million to the company’s total revenue.

Apart from this, a dismal fiscal first quarter and fiscal 2018 revenue guidance further make investor’s skeptical about the company’s near-term performance.

Symantec Corporation Price

 

Symantec Corporation Price | Symantec Corporation Quote

Downward Estimate Revisions

Over the last 30 days, the Zacks Consensus Estimate for the fiscal first quarter and fiscal 2018 witnessed downward revisions. For the fiscal first quarter, the Zacks Consensus Estimate is currently pegged at 11 cents per share, which is lower than earnings of 25 cents projected 30 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2018 is currently pegged at $1.09 per share compared with $1.28 projected 30 days ago.

Bottom Line

Symantec’s top and bottom lines have been under pressure due to persistent weakness in PC sales, which hurt its core Norton Anti-virus software business. Apart from this, intensifying competition from Palo-Alto Networks PANW and FireEye Inc. FEYE has been eroding its market share in the enterprise segment.

As a result, the company has been aggressively restructuring its business. In doing so, over the last one year, the company divested its non-core asset – Veritas – and simultaneously acquired Blue Coat and LifeLock to enhance its capabilities in enterprise market.

The aforementioned acquisitions have helped it in boosting top-line performance, however, the sustained decline in bottom-line results remains a major concern.

Although, the company is on track to realize over $550 million of cost savings by the end of fiscal 2018 through its cost-restructuring initiatives and synergies from the acquired businesses, we believe that these initiatives will not be enough to restrain the declining earnings.

Currently, Symantec carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the Computer-Software industry is ACI Worldwide, Inc. ACIW, which sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

ACI Worldwide has a long-term expected EPS growth rate of 11.5%.

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Click for Free FireEye, Inc. (FEYE) Stock Analysis Report >>
 
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