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Will Growth in AR & IoT Bookings Aid PTC in Q1 Earnings?

Zacks Equity Research

PTC Inc. PTC is scheduled to report first-quarter fiscal 2020 results on Jan 22.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $345.92 million, which suggests year-over-year growth of 3.3%. Moreover, the consensus mark for earnings has been steady at 45 cents over the past seven days, indicating a decline of 19.6% year over year.

Notably, the company has a four-quarter positive earnings surprise of 23.36%, on average.

PTC reported fourth-quarter fiscal 2019 non-GAAP earnings of 64 cents per share (per ASC 606 adopted on Oct 1, 2018), beating the Zacks Consensus Estimate by 42.22%. Earnings (per ASC 605) were 45 cents, flat on a year-over-year basis.

Revenues on a non-GAAP basis (per ASC 606) were $335.2 million, beating the Zacks Consensus Estimate by 0.47%. Revenues on a non-GAAP basis (per ASC 605) increased 4% year over year to $335 million.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

PTC’s top line is expected to have benefited from momentum in industrial IoT and AR bookings in the fiscal first quarter. Notably, in the last reported quarter, non-GAAP IoT software revenues grew 27% on a year-over-year basis to $41 million.

Particularly, robust adoption of the latest Vuforia Expert Capture solution is expected to have generated incremental revenues in the first quarter.

New deal wins on the back of synergies from alliances with Rockwell Automation and Microsoft are expected to have driven the top line in the quarter under review.

Notably, the partnership with Microsoft that combines ThingWorx Industrial Innovation Platform and Azure IoT is likely to have helped the company clinch new contracts in the IoT domain, primarily involving the smart connected product market.

Further, the transition to a subscription business model from a perpetual license model is expected to have driven recurring revenue growth.

PTC Inc. Price and EPS Surprise


PTC Inc. Price and EPS Surprise

PTC Inc. price-eps-surprise | PTC Inc. Quote

Key Development in Q1

During the fiscal first quarter, PTC acquired Onshape for $470 million in cash to enhance its Creo and Windchill products with advanced SaaS capabilities.

Although the acquisition holds promise for the long term, rising spend on enhancing product portfolio by means of acquisitions and other initiatives is anticipated to have impeded margin expansion in the fiscal first quarter.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for PTC 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. But that’s not the case here.

PTC has a Zacks Rank #3 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 to Consider

Here are a few stocks which you may consider as our proven model shows that these have the right mix of elements to beat estimates this time around:

Apple AAPL has an Earnings ESP of +4.08% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +10.80% and a Zacks Rank of 1.

Trimble Inc. TRMB has an Earnings ESP of +1.59% and a Zacks Rank of 2.

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