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Autodesk (ADSK) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Autodesk ADSK is set to report fourth-quarter fiscal 2019 results on Feb 28.

The company delivered average four-quarter positive earnings surprise of 37.1%. In the last reported quarter, the company's earnings of 29 cents per share topped the Zacks Consensus Estimate by 3 cents per share.

Revenues of $660.9 million beat the Zacks Consensus Estimate of $642 million and also increased 28.3% year over year.

For the fourth quarter, Autodesk expects revenues between $700 million and $710 million. Non-GAAP earnings are anticipated in the range of 40-44 cents per share.

The Zacks Consensus Estimate for the quarter to be reported is pegged at 42 cents per share, indicating year-over-year increase of 566.7%. Further, the consensus mark for revenues is pegged at $707.1 million, up roughly 27.7% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q4 Results

Autodesk’s business model transition from perpetual licenses to cloud-based subscription is expected to boost revenues in the near term.

The company witnessed robust growth in total annualized revenue per subscription (ARPS) and annual recurring revenue (ARR) in the last reported quarter. ARR, which was up 33% year over year, validates the success of the company’s business model transition and the overall health of the company..

Subscription plan ARR increased substantially driven by growth in product subscription coupled with robust performance of enterprise business agreement (EBA). Moreover, cloud ARR grew more than 36% year over year in the last reported quarter. The biggest contributor to cloud ARR was BIM 360 family of products, with the company adding 53,000 subs in the BIM 360 space in the previous quarter.

The company is benefiting from growing traction in BIM 360 products. Autodesk stated that customers are deploying all modules of the BIM 360 platform. The construction management solution has been adopted by large clients like AECOM, Arcadis, Swinerton and Layton. The continued momentum is expected to boost the top line in the to-be reported quarter.

Autodesk acquired PlanGrid in the quarter under review, which solidifies its construction portfolio. Notably, the integration of PlanGrid software with BIM 360 will enable seamless exchange of 2D and 3D project information. The enhanced feature is expected to help Autodesk win more clients in the long haul.

In the previous quarter, Autodesk’s e-store accounted for a significant portion of the company’s digital sales and generated 20% of the product subscriptions. Management stated that e-store grew 65% year over year and captured a significant portion of the company’s AutoCAD business. Additionally, Autodesk’s direct and indirect business channels are growing at the same pace, which is a positive.  

Nevertheless, the ongoing business model transition is expected to negatively impact the company’s revenues in the to-be-reported quarter.

Sluggish Maintenance revenues (22.7% of total revenues in the third-quarter) due to continued migration of maintenance plan subscriptions to subscription plan is a headwind

Moreover, rising expenses on the back of increased hiring and acquisitions are expected to hurt the company’s profitability in the to-be reported quarter.

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.

Autodesk has a Zacks Rank #4 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Momo Inc. MOMO has an Earnings ESP of +1.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Inc. AVGO has an Earnings ESP of +2.68% and a Zacks Rank #3.

Tencent Holding Ltd. TCEHY has an Earnings ESP of +3.57% and a Zacks Rank #3.

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