Analysts' Choice: Clouds Clear For Citrix

5/30/2016


  Recent Price
$83
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
17
  Shares (millions)
156
  Long-Term Debt As % Of Capital
39%
  52-Week Price Range
$90.00 - $60.91

Many workers have Citrix Systems ($83; CTXS) to thank for their ability to telecommute. Its virtual-computing products let employees access corporate data from far-flung locations.

Citrix has undergone a series of shakeups in the past year, starting in June 2015, when activist investor Elliott Management disclosed a 7% stake in the company. Changes the investor proposed included stock buybacks, cost cuts, and asset divestments to sharpen the company's focus.  

Since Elliott's involvement, Citrix has increased stock buybacks, fattened profit margins, hired a new CEO, and announced a spin-off — with the stock rallying 26% along the way. Citrix shares look to have more room to run, considering they trade at 17 times trailing earnings, 19% below the median for S&P 1500 application-software stocks and 52% below their own five-year median. The stock, earning a Quadrix Overall score of 97, is a Focus List Buy and a Long-Term Buy.

Turning the virtual page

Microsoft ($52; MSFT) veteran Kirill Tatarinov, took over as Citrix's new CEO in January. Tatarinov faces a changing landscape in a virtualization market currently dominated by two players: Citrix and VMware ($60; VMW). Rising use of mobile devices for work poses a challenge to both firms, because users seem to appreciate the smartphone and tablet experience more than the traditional desktop. To help cope with this shift, Citrix has developed XenApp and XenMobile, which let workers access Microsoft Windows on their mobile devices.

One of Tatarinov's first big projects involves the tax-free spinoff of the GoTo business (now called GetGo), slated for completion in the second half of 2016. Shareholders will receive stock in the new company, which will include Citrix's mobility unit (22% of total revenue and 10% of its profits last year). The XenMobile and XenApp products will remain part of Citrix's Workspace Services suite, which should generate about two-thirds of Citrix's revenue after the deal. The rest of the company's sales come from networking (29% of non-mobility revenue in 2015) and professional services (6%).

The company's other recent initiatives are already bearing fruit. Operating profit margins have expanded more than five percentage points in four straight quarters, evidence of management's cost-cutting success. A $500 million stock-buyback plan, announced in November, has already reduced the share count 4%.

Citrix also enjoys remarkably steady operating momentum. Revenue has risen in 28 straight quarters and 52 of the past 53 quarters, consistent with the nature of its licensing updates and maintenance, which generate nearly half of company revenue. Annual sales have grown at an annualized clip of 12% in the past five years, ranking in the top 20% of S&P 500 stocks.

Conclusion

Analyst estimates are rising, with the consensus projecting Citrix to earn $1.14 per share in the June quarter, up 14% on 3% higher revenue. Citrix has topped the consensus profit estimate in 12 consecutive quarters.

An annual report for Citrix Systems Inc. is available at 851 W. Cypress Creek Road, Fort Lauderdale, FL 33309, (954) 267-3000; www.citrix.com.

CITRIX SYSTEMS
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '16
1.18
vs.
0.65
9%
79.16
-
60.91
18 - 14
Dec '15
1.66
vs.
1.10
6%
84.17
-
68.50
22 - 18
Sep '15
1.04
vs.
0.75
7%
78.42
-
65.11
22 - 19
Jun '15
1.00
vs.
0.83
2%
73.12
-
60.85
22 - 18
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2015
3.28
4.24
0.00
84.17
-
56.47
20 - 13
2014
3.14
3.30
0.00
72.89
-
51.18
22 - 16
2013
2.92
3.02
0.00
77.16
-
54.52
26 - 18
2012
2.59
2.87
0.00
87.99
-
56.57
31 - 20
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
97
97
57
90
75
93
91

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.


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