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Is a Surprise in Store for Autodesk (ADSK) in Q4 Earnings?

Zacks Equity Research

Autodesk, Inc. ADSK is set to report fourth-quarter fiscal 2017 results on Mar 2. In the last quarter, the company delivered a negative earnings surprise of 2.38%. The company has delivered an average positive earnings surprise of 26.79% in the trailing four quarters.

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

Factors to Consider

Autodesk’s business transition from licenses to cloud-based services is expected to benefit it in the long run by boosting its subscriptions and deferred revenues. In the last reported quarter, total subscriptions increased approximately 134,000 from the prior quarter while new model subscriptions (product, enterprise flexible license, and cloud subscription) increased 168,000 to 861,000. 

Autodesk is well positioned to capitalize on the rapid adoption of computer-aided designing and manufacturing through its comprehensive product portfolio. We expect its broad product portfolio to generate new customers in both domestic and overseas markets. 

Autodesk’s aggressive acquisition strategy has played a pivotal part in developing its business. Plus, Autodesk also expanded its share repurchase program in its efforts to maximize shareholder value. Cost cutting initiatives are also a big positive.

However, the company’s financials may also be affected by increasing investments in cloud-based infrastructure and marketing initiatives. Foreign exchange fluctuations and competition in the cloud-computing domain from the likes of Amazon.com Inc. AMZN, Microsoft Corp. MSFT and Adobe Systems also remain headwinds.

For the fourth quarter of fiscal 2017, Autodesk expects revenues in a range of $460 million - $480 million. Non-GAAP loss per share (excluding stock-based compensation expense and amortization of acquisition-related intangibles) is expected in a range of 32 cents– 39 cents for the quarter.

Autodesk, Inc. Price and EPS Surprise

Autodesk, Inc. Price and EPS Surprise | Autodesk, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Autodesk is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Autodesk’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 49 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Autodesk has a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a company, which you may consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Exlservice Holdings, Inc. EXLS with an Earnings ESP of +3.85% and a Zacks Rank #2.

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