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Factors Setting the Tone for Guidewire's (GWRE) Q4 Earnings

Zacks Equity Research
·5 min read

Guidewire Software, Inc. GWRE is slated to report fourth-quarter fiscal 2020 results on Sep 2.

For the fiscal fourth quarter, Guidewire expects revenues of $204.9-$212.9 million. The Zacks Consensus Estimate for revenues is pegged at $208.4 million, indicating a decline of 0.3% from the year-ago quarter.

The Zacks Consensus Estimate for earnings has been unchanged over the past 30 days at 45 cents per share, indicating a decline of 19.6% on a year-over-year basis.

Notably, the company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 164.22%.

Factors Likely to Have Influenced Q4 Results

Guidewire's fiscal fourth-quarter results are likely to reflect gains from solid momentum in cloud-based InsurancePlatform suite of solutions. Robust uptake of subscription-based InsuranceSuite Cloud offerings, in particular, is expected to have contributed to License and subscription revenues in the to-be-reported quarter.

Guidewire Software, Inc. Price and EPS Surprise

 

Guidewire Software, Inc. Price and EPS Surprise
Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. price-eps-surprise | Guidewire Software, Inc. Quote

Further, the coronavirus crisis-triggered demand for cloud-based insurance software solutions is likely to get reflected in the to-be-reported quarter’s revenues.

Markedly, prominent insurers, including the likes of Aviva Italy, selected the company’s InsuranceSuite Cloud in the quarter to be reported to accelerate innovation, maintain technical currency, and empower its employees. Aviva Italy also selected Guidewire EnterpriseEngage to deliver omni-channel experiences to all its stakeholders. The new deal wins might get reflected in the fiscal fourth-quarter revenues.

Incremental adoption of the latest InsuranceSuite 10 and InsuranceSuite Cloud offerings is expected to have driven the implementation of InsuranceNow. Growing clout of multiple components of Guidewire’s InsurancePlatform, which included InsuranceSuite, digital, data and analytics, is expected to have been a tailwind.

Also, growing clout ClaimCenter and PolicyCenter solutions are expected to have contributed to revenues. During the quarter under review, ConTe.it selected Guidewire ClaimCenter for its claims management system, while Guidewire DataHub has been adopted for its enterprise-wide data management capabilities.

Furthermore, Optio Group adopted Guidewire Cyence for Cyber Risk Management to enhance its data warehouse capabilities. Moreover, Guidewire Cyence for Small Business was selected to support profitable small business growth.

Notably, Guidewire expects License and subscription revenues of $138.4-$146.4 million. The Zacks Consensus Estimate is pegged at $142 million compared with $93.2 million reported in the fiscal third quarter.

Moreover, the company’s fiscal fourth-quarter results are expected to reflect gains from an expanding partner base in the PartnerConnect program. Notably, with the PartnerConnect program, insurers can easily access Guidewire’s Marketplace, which helps them introduce innovative solutions and adapt to changing market demands.

During the quarter to be reported, ClaimFox joined PartnerConnect program as a Solution partner to help joint customers improve efficiency and ensure compliance on all requests for copies of claim files.

Additionally, the company has been increasing investments to enhance insurance software products via collaborations with leading on-demand cloud infrastructure vendors, including Amazon Web Services and Microsoft Azure.

The company has been focused on enhancing the Guidewire Cloud platform with new capabilities, including digital frameworks, automation, tooling, and other cloud services and leverage Guidewire data platform. The latest functionalities are anticipated to have driven the adoption of the company’s InsurancePlatform suite of solutions in the fiscal fourth quarter.

Notably, Maintenance revenues are anticipated to be $20.2-$21.2 million. The Zacks Consensus Estimate is pegged at $20.8 million, whereas it reported $20.7 million in the prior quarter. Management anticipates maintenance revenues to be muted as customers opt for cloud-based subscription services over term licenses.

Meanwhile, Services revenues are projected between $42.7 million and $48.7 million. The Zacks Consensus Estimate is pegged at $45.7 million, whereas it reported $54.3 million in the fiscal third quarter.

However, the coronavirus crisis-led macroeconomic weakness might have impacted renewals from small- and medium-sized insurers. Also, increasing expenditure on product enhancements and marketing initiatives may have impeded margin expansion in the fiscal third quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Guidewire this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Guidewire has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks that Warrant a Look

Here are a few companies, which have the right combination of elements to post an earnings beat:

Zscaler, Inc. ZS has an Earnings ESP of +21.74% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup Company CPB has an Earnings ESP of +1.67% and a Zacks Rank #2.

Signet Jewelers Limited SIG has an Earnings ESP of +38.82% and a Zacks Rank of 2.

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