Autodesk Inc. (ADSK): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Autodesk reported impressive second-quarter fiscal 2015 results. Both revenues of $637 million and earnings of $0.21 per share beat the Zacks Consensus Estimate. The company provided an upbeat guidance for the third quarter. We believe that increasing competition from the likes of Adobe pose a major concern for the company. Moreover, increasing investment in new products is expected to hurt margins in the near term. However, we believe that the company has significant growth opportunities in the AEC and manufacturing markets going forward. Further, the business transition to cloud-based offerings will boost its profitability in the long run. Additionally, its efforts to expand its mobile applications for iOS as well as Android platforms will drive growth going forward. Thus, we upgrade ADSK shares to Outperform and set a target price target of $71.00.


Overview:

San Rafael, CA.-based Autodesk (ADSK) develops model-based design, engineering and documentation software and also offers consulting, support and training services. Autodesk's software helps customers to imagine, design and create digital prototypes of their ideas. Through the company's software they can visualize, simulate and analyze the real-time performance of these digital prototypes.

Autodesk serves customers in architecture, engineering and construction manufacturing and digital media and entertainment industries. Autodesk operates in four segments: Platform Solutions and Emerging Business and Other (PSEB), Architecture, Engineering and Construction (AEC), Manufacturing Solutions (MFG), and Media and Entertainment (M&E). The company also offers design and creation suites that combine multiple products across segments.

The PSEB (35.0% of fiscal 2014 revenues) segment consists of AutoCAD (computer-aided design application) and AutoCAD LT. AutoCAD is used for designing, drafting, detailing and visualization and is the company's largest revenue-generating product. AEC (32.0% of fiscal 2014 revenues) segment offerings primarily include Autodesk Revit customized for building information modeling (BIM). The MFG (25.0% of fiscal 2014 revenues) segment offers digital prototyping solutions to manufacturers in automotive and transportation, industrial machinery, consumer products and building products industries. The M&E (8.0% of fiscal 2014 revenues) segment includes two product groups Animation (3ds Max and Maya software) and Creative Finishing.

Autodesk's revenues declined 1.7% year over year to $2.27 billion in fiscal 2014. License and other (55.0% of revenues) declined 8.0% year over year, while Subscription (45.0% of revenues) climbed 7.5% from fiscal 2013. The company's flagship products (AutoCAD, AutoCAD LT, AutoCAD Civil 3D, AutoCAD Mechanical, AutoCAD Architecture, Autodesk 3ds Max and Autodesk Maya) accounted for approximately 51% of revenues in 2014. Design and creation suites accounted for approximately 34.0% of revenues, while new products contributed 14.0% of revenues in fiscal 2014.

Autodesk distributes its products and services primarily through indirect channels (approximately 2,500 resellers), which accounted for 84.0% of the 2014 revenues. Sales through its largest distributor, Tech Data Corp, accounted for 24.0% of 2014 revenues.

Autodesk faces significant competition in most of its operating segments from the likes of Adobe, ANSYS, Bentley Systems, Dassault, Google Inc., Parametric Technology, Siemens Product Lifecycle Software and Trimble Navigation Limited.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Stocks

Referenced Stocks: ADSK , AEC , MFG , BIM

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