Earnings Beat: Fortinet, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Fortinet, Inc. (NASDAQ:FTNT) shareholders are probably feeling a little disappointed, since its shares fell 6.1% to US$59.63 in the week after its latest quarterly results. It looks like a credible result overall - although revenues of US$1.4b were what the analysts expected, Fortinet surprised by delivering a (statutory) profit of US$0.39 per share, an impressive 26% above what was forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Fortinet

Taking into account the latest results, the consensus forecast from Fortinet's 41 analysts is for revenues of US$5.80b in 2024. This reflects a credible 7.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to decrease 3.3% to US$1.52 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$5.78b and earnings per share (EPS) of US$1.39 in 2024. So the consensus seems to have become somewhat more optimistic on Fortinet's earnings potential following these results.

The average the analysts price target fell 5.7% to US$71.95, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Fortinet at US$90.14 per share, while the most bearish prices it at US$54.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Fortinet's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 10% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that Fortinet is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Fortinet's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Fortinet's revenue is expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Fortinet analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that Fortinet is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.