Palo Alto Networks stock leaps following strong outlook that CEO terms ‘prudent’

The company said it expects adjusted earnings of $2.03 to $2.06 a share on revenue of $1.54 billion to $1.56 billion and billings of $1.68 billion to $1.7 billion for the fiscal first quarter, and $9.40 to $9.50 a share on revenue of $6.85 billion to $6.9 billion and billings of $8.95 billion to $9.05 billion for the year.

Analysts surveyed by FactSet had forecast $2.03 a share on revenue of $1.54 billion and billings of $1.69 billion for the first quarter, and $9.27 a share on revenue of $6.74 billion and billings of $8.58 billion for the year.

And that’s prudently taking into account possible macroeconomic headwinds, Nikesh Arora, chairman and chief executive of Palo Alto Networks, told analysts on the call.

“We’ve got companies which are reducing guidance, companies reducing EPS guidance, companies which are warning of potential customer deal life cycles being smaller, so we were trying to make sure that we were prepped for both the upside and down side scenario,” Arora told analysts. “I think it’s fair for us to be prudent in that market.”

The company has been racking up the beat-and-raise quarters as of late. Back in May, the company increased its annual outlook for a third quarter in a row, to full-year outlook to adjusted earnings of $7.43 to $7.46 a share, revenue of $5.48 billion to $5.5 billion, and billings of $7.11 billion to $7.14 billion. The company reported adjusted earnings of $7.56 a share on revenue of $5.5 billion and billings of $7.47 billion.

For the fiscal fourth quarter, Palo Alto Networks reported net income of $3.3 million, or 3 cents a share, versus a loss of $119.3 million, or $1.23 a share, in the year-ago period. Adjusted earnings, which exclude share-based compensation charges and other items, were $2.39 a share, compared with $1.60 a share in the year-ago period.

The security-software company’s revenue rose to $1.55 billion from $1.22 billion in the year-ago quarter. Billings, which reflects future business under contract, rose 44% to $2.7 billion from a year ago.

Analysts had forecast earnings of $2.28 a share on revenue of $1.54 billion and billings of $2.33 billion, based on Palo Alto Networks’ forecast of $2.26 to $2.29 a share on revenue of $1.53 billion to $1.55 billion and billings of $2.32 billion to $2.35 billion.

Palo Alto Networks shares are down 9% for the year. In comparison, the ETFMG Prime Cyber Security ETF 
HACK,
-1.90%
is down 20%, the S&P 500 index
SPX,
-2.14%
  down 13%, and the tech-heavy Nasdaq Composite Index 
COMP,
-2.55%
 if off 20%.