Workday Looks Bright After Q4 Earnings: Should You Hold?

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Workday Inc.WDAY has been a favorite with investors, courtesy of its rising share price and strong fundamentals. The company's shares have gained 60.5% year over year, substantially outperforming the industry's 34.1% rally.

Let's now delve deeper and take a look at some of the aspects aiding the company's performance.

Key Drivers

Workday delivered fourth-quarter fiscal 2018 non-GAAP earnings of 28 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The figure also improved on a year-over-year basis.

Strong growth can primarily be attributed to 33% surge in revenues, which totaled $582.5 million. The figure surpassed the guidance of $538-$540 million and also outpaced the Zacks Consensus Estimate for revenues of $574 million. The robust top-line performance was driven by solid growth in subscription and professional revenues.

Customer Addition & Product Launches: Key Catalyst

During the quarter, Workday extended capabilities and tools in Workday HCM with new customer experience.

The company added 58 financial management customers, up 45% from the year-ago quarter. The clientele now includes two Fortune 500 customers, one of which is a Fortune 100 company. Some other new financial management customers include American Family Mutual Insurance and Quicken Loans.

Further, it won 60 planning customers. Total planning customers on Workday's platform totals more than 250 and total number of financial management customers totaled more than 450.

Workday announced the availability of Workday Prism Analytics and Workday Cloud Platform, the first offering delivered on Workday Data-as-a-Service, during the quarter.

Workday was placed in the Leaders quadrant of "Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises" by Gartner.


Workday announced 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.

Workday also acquired SkipFlag during the quarter, marking another step in its efforts to invest in areas such as machine learning, advanced search and natural language processing.

Positive Earnings Surprise History

Workday has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, recording a positive average earnings surprise of 58.65%.

Further, it has a long-term expected EPS growth rate of 32.65%.

Zacks Rank and Key Picks

Workday currently carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA , Facebook, Inc. FB and Paycom Software, Inc. PAYC , all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

NVIDIA, Facebook and Paycom Software have long-term earnings per share growth rate of 10.3%, 26.5% and 25.8%, respectively.

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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 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.

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