FireEye earnings top estimates, but forecast hurts stock

FireEye earnings top estimates, but forecast hurts stock

Multimillion-dollar deals last year skew Wall Street expectations upward, execs say

FireEye Inc. late Wednesday reported results that topped Wall Street estimates, but the company’s forecast appeared light and helped send shares down in after-hours trading.

FireEye FEYE, -0.32% shares closed down 0.3% at $18.42 on Wednesday, then fell more than 7% in immediate late trading after results were released. In comparison, the S&P 500 index SPX, -0.22% closed down 0.2%, the tech-heavy Nasdaq Composite Index COMP, -0.36% finished down 0.4%, and the ETFMG Prime Cyber Security HACK, -0.34% closed down 0.3%.

The company reported a fourth-quarter loss of $48.4 million, or 25 cents a share, compared with a loss of $70.4 million, or 39 cents a share, in the year-ago period. Adjusted earnings were 6 cents a share. FireEye was expected to report earnings of 5 cents a share, according to 26 analysts polled by FactSet. The company had forecast adjusted earnings of 4 cents to 6 cents a share.

Revenue rose to $217.5 million from $205.8 million in the year-ago quarter. FireEye was forecast to report revenue of $216.8 million, according to 23 analysts polled by FactSet, while the company had predicted revenue of $214 million to $218 million.

Billings, which reflects future business under contract, were $265 million. FireEye had forecast fourth-quarter billings of $245 million to $255 million, while analysts polled by FactSet had estimate billings of $251.2 million.

FireEye revenue for services — including things like threat intelligence, email security, endpoint security and network security — rose to a record of $38.7 million. Analysts had forecast services revenue of $36.7 million.

FireEye, however, expects an adjusted loss of 4 cents to 2 cents a share on revenue of $208 million to $212 million for the first quarter, and adjusted earnings of 17 cents to 21 cents a share for the year on revenue of $880 million to $890 million. Analysts expect adjusted earnings of 1 cent a share on revenue of $211.7 million for the first quarter, and 19 cents a share on revenue of $891.7 million for the year.

The company also forecast billings of $170 million to $180 million for the first quarter, and $910 million to $930 million for the year. Analysts forecast billings of $193.5 million for the first quarter and $919 million for the year.

Accounting for the outlook, which is below the Wall Street consensus, Frank Verdecanna, FireEye chief financial officer and chief accounting officer told MarketWatch in an interview that a $10 million-plus deal and two $5 million-plus deals in the year-ago first quarter are making a tough comparison and likely skewing analyst estimates upward.

“So the combination of those three deals in Q118 were about $25 million,” Verdecanna said. “And we’re not expecting any greater than $5 million deals in the quarter.”

Verdecanna said FireEye expects will likely get some $5 million-plus deals in the second, third, and fourth quarters.

“We did have a tough grow-over, we’re showing normal linearity with this,” said Kevin Mandia, FireEye chief executive, in an interview.

Verdecanna and Mandia added that FireEye has had eight straight quarters where they have met or exceeded their guidance.

“And that’s what we intend to keep doing,” Mandia said.

Of the 28 analysts who cover FireEye, 12 have buy ratings and 16 have hold ratings, with an average price target of $20.48.

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