Autodesk Reaffirms - Analyst Blog

Maker of 3D design software applications, Autodesk Inc. (ADSK) reiterated its previously issued guidance for the fourth quarter and full fiscal 2011 as well as for fiscal 2012. Management had previously given its guidance during the third quarter earnings call on November 18, 2010.

For the fourth quarter of 2011, Autodesk expects revenues to be in the range of $500.0 million to $520.0 million. Non-GAAP earnings are expected in the range of 30 cents to 33 cents per share for the quarter.

Earnings per share (EPS) exclude 6 cents related to stock-based compensation expense and 5 cents for the amortization of acquisition-related intangibles, net of tax. The current Zacks Consensus Estimate (including stock-based compensation but excluding amortization related charges) is pegged at 27 cents per share for fourth-quarter 2011, in line with management's expectation.

For fiscal 2011, Autodesk expects revenues in the range of $1.924 billion to $1.944 billion (12.0% to 13.0% year-over-year growth). Non-GAAP operating margin is expected to increase in the range of 430 to 460 basis points on a year-over-year basis.

For fiscal 2011, non-GAAP earnings are expected to be in the range of $1.27 to $1.30 per share. The current Zacks Consensus Estimate is pegged at $1.04 per share in earnings.

For fiscal 2012, Autodesk forecasts revenues to increase 10.0% year over year. Non-GAAP operating margin is expected to increase approximately 200 basis points on a year-over-year basis. Autodesk did not provide any earnings guidance. The current Zacks Consensus Estimate is pegged at $1.35 per share in earnings for fiscal 2012.

Estimate Revision

The Zacks Consensus Estimate for fiscal year 2011 increased by a penny to $1.04 over the last month, while fiscal year 2012 estimates were up by 6 cents.

In the last 30 days, 3 of 7 analysts made an upward revision to their 2011 estimates while 2 analysts lowered the estimate for full-year 2011. For fiscal year 2012, 8 of the 9 have raised their estimates. There were no downward estimate revisions.

The company is well positioned to benefit from a recovery in the economic environment, but we expect a strong recovery in 2012. Over the long term, we remain positive on the company.

Increase Share Repurchases

To reduce the dilution from high stock-based compensation expense and increase shareholder wealth, Autodesk has a stock repurchase program. During fiscal year ended January 31, 2010, the company repurchased 2.7 million shares for $63.2 million. In the first three quarters of fiscal 2010, Autodesk repurchased approximately 7 million shares at an average price of $29.13 per share.

Autodesk announced that its board of directors approved the repurchase of up to 20 million shares; in addition to approximately 5.5 million shares remaining under the previously authorized share repurchase programs. The repurchase program does not have an expiration date and the company did not say by when it plans to begin repurchase.

Our Take

Autodesk's third quarter 2011 revenues beat the Zacks Consensus Estimate while EPS was in line. Results were boosted by a double-digit growth in all geographical regions, new licenses and impressive cost controls. Initial guidance for fiscal 2012 was encouraging and we have raised our earnings and revenue estimate for 2012.

We expect the shares to drive higher on improving license trends, growth in new accounts and subscription, improving European business, growing key metrics and increasing penetration in emerging markets.

Over the long term, we remain positive on the stock, given its operating margin leverage, strong revenues due to stability in end market, increased demand for 3D products, expanding market share, a diversified product pipeline and cost control.

However, foreign exchange headwinds and intense competition from Adobe Systems Inc. (ADBE), Apple Inc. (AAPL) and Avid Technology (AVID) are areas of concern.

Autodesk has a Zacks #3 Rank, which implies a Hold rating on a short-term basis (1–3 months). For the long term, we maintain our Outperform recommendation on the stock.

 
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