Markets

Can Workday (WDAY) Beat Q4 Earnings on Product Strength?

Workday, Inc.WDAY is set to report fourth-quarter 2018 results on Feb 27. Notably, the company has beaten the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 250.3%.

Last quarter, the company delivered non-GAAP earnings of 24 cents per share, which surpassed the Zacks Consensus Estimate of 15 cents. The figure was also better than 5 cents reported in the year-ago quarter.

Strong growth can primarily be attributed to 34.3% jump in revenues, which totaled $555.4 million. The figure surpassed the guidance of $538-$540 million and beat the Zacks Consensus Estimate for revenues of $540 million. The robust top-line performance was driven by solid growth in subscription and professional revenues.

What to Expect

For fourth-quarter fiscal 2018, Workday expects revenues in the range of $538-$540 million. The Zacks Consensus Estimate is currently pegged at $573.4 million.

Buoyed by the encouraging results, Workday raised guidance for fiscal 2018. Revenues are projected in the range of $2.132-$2.134 billion, up from the previous range of $2.093-$2.1 billion. The revised guidance reflects growth of 35-36%.The Zacks Consensus Estimate is currently pegged at $2.13 billion.

The Zacks Consensus Estimate for earnings is currently pegged at 21 cents, up roughly 200% from the year-ago quarter.

Workday's shares have gained 38.7% year over year, substantially outperforming the industry 's 27.1% rally.

Let's see how things are shaping up prior to this announcement.

Factors Likely to Influence Q4 Results

Strong Product Portfolio & partnerships: Key Catalyst

Workday announced the availability of Workday Prism Analytics and Workday Benchmarking, the first offering delivered on Workday Data-as-a-Service, during the quarter. The company's foray into the platform-as-a-service market by launching the Workday Data-as-a-Service Platform is expected to further boost its top-line.

Management stated that Hitachi, Shelter Insurance and United Technologies Corporation have already selected Workday Prism Analytics solution.

The company believes that these solutions will expand Workday's total addressable market (TAM) with each having more than $1 billion opportunity in revenues. Further, these factors are likely to have a positive impact on the to-be-reported quarter.

Workday also announced its partnership with Duo Security to integrate the latter's multi-factor authentication (MFA) technology. This will enhance security and improve functionality of Workday's user interface. With the help of this collaboration Workday's customers will be able to experience greater flexibility in operations, enhanced multi-level security, increased awareness and greater administrative control. This additional level of protection will help the company gain the trust of its users, consequently increasing adoption of its products and ultimately boosting the top line.

Customer Addition Continues

During the quarter, companies like Lowe's Corporation, M&T Bank Corporation, Lloyds Bank plc, Software AG and Oshkosh Corporation selected Workday's HCM solution. Moreover, Dell USA, Coca-Cola Company and Cerner Corporation went live.

Workday added 37 financial management customers, up more than 60% from the year-ago quarter. The clientele now includes Sanford Health, University of Louisiana and Melco Resort Services. Further, the company won 34 planning customers. Total planning customers on Workday's platform totals more than 200.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Workdayhas a Zacks Rank #3 and an Earnings ESP is +7.24%.

Other Stocks to Consider

Here are some companies you may also want to consider as our model shows that these too have the right combination of elements to beat on earnings:

Scripps Networks Interactive, Inc SNI has an Earnings ESP of +4.80% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Analog Devices, Inc. ADI has an Earnings ESP of +0.57% and a Zacks Rank #3.

Palo Alto Networks, Inc. PANW has an Earnings ESP of +0.53% and a Zacks Rank #3.

Zacks Top 10 Stocks for 2018

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?

Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don't miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2018 today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Workday, Inc. (WDAY): Free Stock Analysis Report

Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report

Scripps Networks Interactive, Inc (SNI): Free Stock Analysis Report

Analog Devices, Inc. (ADI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

WDAY ADI PANW

Other Topics

Earnings Stocks

Latest Markets Videos