Autodesk, Inc.ADSK is set to report first-quarter fiscal 2016 results on May 19. In the last quarter, the company delivered a negative earnings surprise of 7.69%. The company has delivered positive earnings surprises in three of the last four quarters, with an average beat of 10.65%. Let's see how things are shaping up for this announcement.
Factors to Consider
In the last quarter, Autodesk reported lower-than-expected earnings. The bottom line was marred by higher expenses due to the ongoing business-model transition in areas like software, subscription and a shift toward cloud-based offerings. Nonetheless, revenues were ahead of expectations, surpassing both management's guided range and the Zacks Consensus Estimate.
We believe Autodesk is likely to benefit from its ongoing business transition. Further, the increasing adaptability of cloud-based services remains a positive. The transition is boosting the company's subscriptions and deferred revenues that are expected to benefit it in the long run. Moreover, the increasing demand for the company's novel cloud-based products like Fusion 360, BIM 360 and PLM 360 are likely to drive the company's business, going forward.
However, in the near term, the company's profitability will tend to be affected by investments in cloud-based infrastructure and marketing initiatives. Further, the discontinuation of the perpetual license offerings next year may have some impact on the company's financials. In addition, foreign exchange fluctuations and stiff competition in the cloud-computing domain pose concern.
For the first quarter of fiscal 2016, Autodesk expects revenues in the range of $625-$645 million. Non-GAAP EPS is expected in the range of 25-30 cents, excluding stock-based compensation expense of 16 cents and amortization of acquisition-related intangibles of 8 cents per share.
Our proven model does not conclusively show that Autodesk is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Autodesk currently has a negative Earnings ESP because the Most Accurate estimate stands at 12 cents, while the Zacks Consensus Estimate is pegged higher at 14 cents. This equates to a difference of -14.29%.
Zacks Rank: Autodesk's Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Red Robin Gourmet Burgers Inc. RRGB with an Earnings ESP of +4.55% and a Zacks Rank #2 (Buy).
Intuit Inc. INTU with an Earnings ESP of +2.34% and a Zacks Rank #2.
Onconova Therapeutics, Inc. ONTX with an Earnings ESP of +1.59% and a Zacks Rank #2.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.