Autodesk: Earnings Preview

Feb.22.12 | About: Autodesk, Inc. (ADSK)

Autodesk Inc. (NASDAQ:ADSK) is scheduled to release its fiscal fourth quarter 2012 results after the closing bell on Thursday, Feb 23, 2012. In the run-up to the earnings release we notice only one analyst revising estimates in the last 30 days.

A Sneak Peek into the Previous Quarter

Autodesk reported a strong third quarter driven by continued growth in revenues across geographies and business segments. The company reported robust top-line growth on the back of higher license and other revenues, which not only surpassed the Zacks Consensus Estimates, but were also at the higher end of management’s guided range.

Autodesk’s bottom line also improved on a year-over-year basis and moved past the Zacks Consensus Estimates.

Moreover, buoyed by the robust growth in revenues and cost-controlling measures, the company’s operating performance also improved. (For further details, please read: Autodesk Reports Strong 3Q)

Fourth Quarter and FY12 Expectations

For the fourth quarter of 2012, Autodesk expects revenues in the range of $575.0 million to $590.0 million. The Zacks Consensus Estimate is pegged at $584.0 million.

GAAP EPS is expected in the range of 26 cents to 29 cents. Non-GAAP EPS is expected in the 42 cents to 45 cents range. The Zacks Consensus Estimate is currently pegged at 38 cents per share, which is evidently below the guided range.

For fiscal 2012, Autodesk expects revenues in the range of $2.20 billion to $2.21 billion, in line with the Zacks Consensus Estimate of $2.21 billion. GAAP EPS is expected in the range of $1.17 to $1.20 and non-GAAP EPS is expected in the range of $1.70 to $1.73. The Zacks Consensus Estimate is pegged at $1.39. Autodesk expects non-GAAP operating margin to improve by between 210 and 240 basis points in fiscal 2012.

Additionally, the company provided a sneak peak into their fiscal 2013 when the company reported its third quarter. For fiscal 2013, Autodesk expects revenues to increase 10.0% on a year-over-year basis, with about 150 basis points increase in the GAAP operating margin and roughly 200 basis points increase in non-GAAP operating margin, over the fiscal 2012 figures.

Estimation Revision Trend

Out of the six analysts covering the stock, one upward revision was noticed in the last 30 days, while none of the analysts revised their estimates downward. Thus, the Zacks Consensus Estimate of 38 cents moved up a cent over the last 30 days.

For fiscal year 2012, out of the 8 analysts covering the stock, one positive revision was witnessed in the last 30 days, although the EPS estimate for fiscal 2012 remained at $1.39.

Most of the analysts covering the stock are optimistic about the company’s market share gains and presence in emerging markets, which will likely drive the top-line going forward. Moreover, the acquisitions in the field of CAD and gaming middleware sections will provide the company with long-term opportunities, particularly in the web-based communities that will likely boost the company’s cloud offerings going forward.

However, some analysts are cautious about the high exposure of the company in Europe (40% of revenues are derived from Europe), citing the lingering financial turmoil and gloomy macro-economic environment in the region.

Conclusion

Autodesk posted a positive average earnings surprise of 4.02% in the trailing four quarters, implying that on average, the company exceeded the Zacks Consensus Estimate by that magnitude in the stated period. Given the upward trend in positive surprises, the improving product line and growth prospects, we expect the company to post another positive surprise in the upcoming quarter.

In our view, Autodesk’s expanding product portfolio, and broadening industry application and geographic reach will help it sustain longer-term growth through the development of high-volume, lower-cost CAD software. We believe that this will likely drive earnings going forward.

However, foreign exchange fluctuations, increasing exposure to Europe, and competition from Adobe Systems Inc. (NASDAQ:ADBE) and Parametric Technology Corp. (PMTC) are the headwinds. Additionally, challenges in the form of customer concentration keep us in the sidelines for the time being.

We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #4 Rank, which translates into a short-term (1-3 months) Sell rating.

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