How Palo Alto Networks Beat Expectations

By Paul Ausick Updated Jan 12, 11:29AM EST · Published May 31, 4:36PM EDT

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How Palo Alto Networks Beat Expectations — © Thinkstock

Palo Alto Networks Inc. (NYSE: PANW) reported fiscal third quarter 2017 adjusted diluted earnings per share (EPS) of $0.61 on revenue of $431.8 million. In the same period a year ago, the network security company reported EPS of $0.46 on revenue of $345.8 million. Third-quarter results compare to consensus estimates for EPS of $0.55 and $411.92 million in revenue.

On a GAAP basis, the company posted a per-share net loss of $0.67 compared with a loss of $0.73 in the same quarter a year ago. Adjusted earnings excluded the negative effects of share-based compensation of $1.30 per share and other adjustments, partially offset by $0.20 per share in tax adjustments.

CEO Mark McLaughlin said:

We reported record revenue of $432 million in our fiscal third quarter and added the second highest number of new customers in the company’s history. The integrated and highly automated prevention capabilities of our Next-Generation Security Platform continue to differentiate us in the market as we help our customers protect our digital way of life.

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Steffan Tomlinson, the company’s CFO added:

Expansion within our existing customer base and new customer acquisitions in the quarter drove growth in revenue, billings and deferred revenue. In addition, we continue to balance growth and profitability, as cash flow from operations totaled $211.2 million in the quarter, free cash flow totaled $162.6 million, and we ended the quarter with cash, cash equivalents and investments of $2.1 billion.

The company forecast fourth fiscal quarter revenue in a range of $481 to $491 million, a year-over-year gain of 20% to 23%. Diluted, adjusted EPS is pegged at a range of $0.78 to $0.80, Consensus estimates for the fourth quarter call for EPS of $0.74 on revenues of $484.36 million. For the full fiscal year, EPS is expected to come in at $2.48 on revenues of $1.72 billion.

Both third-quarter results and the outlook for the fourth quarter are boosting investors’ spirits Wednesday afternoon. Almost forgotten is the 14% plunge in the company’s share price at the end of the prior quarter which resulted in a resetting of analysts expectations.

The stock closed at $118.59, and traded down up about 11% in the after-hours session at $131.70. The 52-week range is $107.31 to $165.69. The consensus 12-month price target was $142.97 before the results were announced, and the high price target is set at $190.00.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.