Shares of Guidewire Software, Inc. GWRE have returned approximately 20.8% year to date, substantially outperforming the industry’s rally of 6.7%. Meanwhile, the S&P 500 index has witnessed a rise of 0.9%.
The outperformance can primarily be attributed to the company’s elaborate partnership programs and strategic collaborations. Further, strong adoption of several cloud-based products remained a key catalyst.
We note that Guidewire recorded average positive earnings surprise of 190.1% in the trailing four quarters. The company has a long-term expected EPS growth rate of 8%.
Let’s delve deeper and analyze the factors driving Guidewire’s robust quarterly performance.
The company recently was selected by Optimum General Inc. Notably, Guidewire InsurancePlatform Core products will help Optimum General with the operations of their residential lines of business.
Guidewire’s Partner Connect Program has been implemented worldwide, benefiting its customers in the property and casualty insurance industry.
Notably, the company’s ongoing alliance with Verisk Analytics has enabled it to offer robust Guidewire Product Content Management (“GPCM”) service. The move aids Guidewire in delivering robust services aiding the mutual customer base with digital methods and reducing time to market in cost-effective ways.
The company’s acquisition strategy is also a major contributor to growth. The buyouts of ISCS (now called InsuranceNow), FirstBest (now called Guidewire Underwriting Management) and EagleEye Analytics (now known as Guidewire Predictive Analytics) are not only aiding revenue growth but also helping the company to expand clientele.
Additionally, management is optimistic about the completion of the Cyence buyout. Notably, Cyence is a company that determines the economic impact of a cybercrime via a software platform, which is built on cyber-security related data science. The integration of Cyence would enable Guidewire to provide an entire life cycle to the insurance products starting from designing to transaction management.
Moreover, management is extremely optimistic regarding several cloud-based products launched recently, at a time when the P&C insurance industry is moving steadily toward adoption of cloud solutions.
Guidewire delivered first-quarter fiscal 2019 non-GAAP earnings of 36 cents per share, outpacing the Zacks Consensus Estimate by 20 cents. Notably, the company reported a loss of 6 cents in the year-ago quarter. The figure also came ahead of management’s guided range of 18-22 cents per share.
The company reported revenues of $179.7 million, surging 66% from the year-ago quarter. The figure comfortably surpassed the Zacks Consensus Estimate of $163 million and was above the higher end of management’s guided range of $159-$163 million. The increase can primarily be attributed to growth in Services revenues and License revenues.
We believe the upbeat performance will continue in the quarters ahead, in turn providing investors enough reasons to retain the stock.
Zacks Rank & Stocks to Consider
Currently, Guidewire has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Upland Software UPLD , Tesla, Inc. TSLA and Twitter, Inc. TWTR , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software, Tesla and Twitter is currently pegged at 20%, 35% and 22.1%, respectively.
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