SYMANTEC CORP. $21 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 679.2 million; Market cap: $14.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.9%; TSINetwork Rating: Average; www.symantec.com) sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers.
In 2014, the company said it would split into two publicly traded firms. One would keep the Symantec name and focus on antivirus and security software and services. The other, called Veritas Technologies, makes products for data backup and recovery.
However, the company has now decided to sell Veritas to a group of private investors for $8.0 billion. It expects to close the deal on January 1, 2016.
The cash will let Symantec keep paying its $0.15-a-share quarterly dividend, which yields 2.8% on an annualized basis. The company will also add $1.5 billion to its share repurchase program, bringing the total to $2.6 billion.
Meanwhile, in its fiscal 2016 first quarter, which ended July 3, 2015, Symantec earned $275 million, or $0.40 a share, down 12.1% from $313 million, or $0.45, a year earlier.
Revenue declined 13.6%, to $1.50 billion from $1.74 billion. If you exclude the negative impact of the high U.S. dollar on the company’s overseas sales and an extra week in the year-earlier quarter, revenue was flat.
Following the Veritas sale, Symantec will probably buy smaller firms that enhance its computer security technology.
Symantec can easily afford to expand: as of July 3, 2015, it held cash of $3.9 billion, or $5.68 a share. Its total debt was $2.1 billion.
The company expects to earn $1.80 to $1.90 a share in fiscal 2016, and the stock trades at 11.4 times the midpoint of that range. That’s a low p/e ratio in light of Symantec’s high research spending. It spent 18.9% of revenue developing new products in the latest quarter.
Symantec is our #1 buy for 2015.
