Autodesk (ADSK) Gears Up For Q3 Earnings: What's In Store?

Autodesk Inc. (NASDAQ:ADSK) is set to report fiscal third-quarter 2018 results on Nov 28.

In fiscal second-quarter 2018, the company reported non-GAAP loss of 11 cents per share, narrower than the Zacks Consensus Estimate of a loss of 15 cents. The figure was also much narrower than the guided range of a loss of 14–18 cents per share.

Notably, the company has a positive earnings surprise track record. It has beaten estimates in each of the trailing four quarters, delivering an average positive surprise of 23.52%.

Revenues of $501.8 million beat the consensus mark of $494.8 million but fell nearly 8.9% year over year. The figure was better than the guided range of $488–$500 million.

Management continues to emphasize on the fact that revenues will be negatively impacted by the business model transition from “upfront” to “ratably” as well as lower initial purchase price of new offerings.

Notably, Autodesk’s shares have gained 72.6%, substantially outperforming the 35.8% rally of the industry it belongs to. We believe the company’s broad product portfolio and accelerating subscription base to sustain the share price momentum going ahead.

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

Key Factors

Autodesk’s business transition from licenses to cloud-based services is expected to boost subscriptions and deferred revenues. The marketing and promotional activities undertaken by the company are anticipated to sustain its growing subscription base.

We note that Autodesk’s broad product portfolio generates new customers in both domestic and overseas markets as evident from the year-over-year triple digit growth in product subscriptions in major geographies including emerging countries.

Strong adoption of products is driving subscription revenues for the company. In the last reported quarter, the company’s maintenance to subscription or M2S program recorded 63K subscriptions. New customers represented about 30% of the mix in the quarter and continue to contribute a significant portion of product subscription additions.

Moreover, robust performance of BIM 360 and Fusion tools is the reason behind the continuous addition to cloud subscription.

However, although the company plans to keep spending unchanged over the next one year, it remains concerned about increasing foreign exchange headwinds, which might weigh heavily on its expenses.

Stiff competition in the cloud-computing domain from the likes of Amazon (NASDAQ:AMZN) , Microsoft (NASDAQ:MSFT) and Adobe Systems (NASDAQ:ADBE) also remain headwinds.

Autodesk, Inc. Price and EPS Surprise

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

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Autodesk has a Zacks Rank #3 but its Earnings ESP is -4.0%. Therefore, the company is unlikely to deliver a positive surprise this quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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