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Workday (WDAY) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Workday, Inc. WDAY is set to report fourth-quarter fiscal 2020 results on Feb 27.

The consensus mark for fiscal fourth-quarter earnings is pegged at 40 cents, which suggests a decline of 2.4% from the year-ago reported figure. Notably, the consensus estimates have remained stable over the past 30 days.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is currently pegged at $965.2 million, indicating an improvement of 22.4% from the prior-year quarter.

Notably, the company has beat estimates in the trailing four quarters by 24.55%, on average.

Guidance & Estimates in Detail

For fiscal fourth quarter, Workday expects subscription revenues in the range of $828-$830 million. The Zacks Consensus Estimate is pegged at $831 million, indicating growth of 23.4% on a year-over-year basis.

Workday, Inc. Price and EPS Surprise

Workday, Inc. Price and EPS Surprise

Workday, Inc. price-eps-surprise | Workday, Inc. Quote

Further, professional services revenues are projected at $134 million. The Zacks Consensus Estimate is pegged at $134 million, suggesting an improvement of 16.4% on a year-over-year basis.

Factors Likely to Have Influenced Q4 Results

Workday’s fiscal fourth-quarter performance is likely to have benefited from high demand for its cloud-based human capital management (HCM) and financial management solutions, driven by digital transformation of enterprises.

Moreover, growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings is likely to have contributed to the company’s fiscal fourth-quarter performance.

Also, traction across international markets like Germany, Europe and Asia is likely to have led to incremental revenues in the fiscal fourth quarter backed by adoption of the company’s software solutions.

During the quarter under review, Workday concluded acquisition of Scout RFP. The buyout, worth approximately $540 million, is anticipated to aid customers with enhanced source-to-pay solutions and optimized spend.

Although the acquisition holds promise in the long term, growing expenses associated with acquisitions and product development amid stiff competition from Oracle and SAP, are likely to have limited margin expansion in the fiscal fourth quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Workday 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.

Workday 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 to Consider

Here are a few stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Azul S.A. AZUL has an Earnings ESP of +16.13% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BMC Stock Holdings, Inc. BMCH has an Earnings ESP of +7.04% and a Zacks Rank of 2.

Benefitfocus, Inc. BNFT has an Earnings ESP of +35.48% and a Zacks Rank of 2.

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