On Aug 28, 2013, Zacks Investment Research downgraded
Autodesk Inc. (
to a Zacks Rank #5 (Strong Sell).
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Why the Downgrade?
The downgrade primarily reflects declining top-line growth in the
second quarter. Although earnings of 35 cents comfortably beat
the Zacks Consensus Estimate by 4 cents, revenues of $561.7
million just managed to beat the Zacks Consensus Estimate of
Revenues declined for the second straight quarter (down 1.2% in
the second quarter), primarily due to a downturn in some of the
company's end markets, which negatively impacted the company's
products like AutoCAD and AutoCAD LT in the quarter.
Significantly, revenues declined in Asia Pacific (down 1.0% from
the year-ago quarter) and EMEA (down 4.0% year over year),
partially offset by the Americas (up 2.0% year over year) in the
The decline in revenue base had a negative impact on margins.
Gross margin contracted 160 basis points (bps), while operating
margin declined 100 bps from the year-ago quarter.
For the third quarter, Autodesk expects revenues in the range of
$540.0 - $555.0 million and earnings of 36 - 40 cents per share.
A sluggish demand environment, increasing challenges in emerging
markets and shift towards a subscription and rental based model
are expected to hurt top-line growth in the near term.
The Zacks Consensus Estimate for the third quarter of 2014
declined 34.1% (14 cents) to 27 cents per share over the last 60
The Zacks Consensus Estimate for 2014 decreased 17.8% (27 cents)
to $1.25 per share over the last 60 days. The Zacks Consensus
Estimate for 2015 plunged 29.6% (53 cents) to $1.26 per share
over the same period.
Other Stocks to Consider
Not all software providers are performing as poorly as Autodesk.
Dealertrack Technologies (
eGain Corp (
, as both have a Zacks Rank #1 (Strong Buy).
Dassault Systemes SA (
, which has a Zacks Rank #2 (Buy), is also looking good at