From Autodesk To Synopsys, Your Guide To This Week's Software Earnings

KeyBanc Capital Markets previewed the quarterly results of vertical software companies Autodesk, Inc. ADSK, Synopsys, Inc. SNPS and Guidewire Software Inc GWRE in a Sunday note. 

Analyst: Autodesk Stock To Continue Higher

Autodesk has been executing well the past several quarters, and the stock, which is up 70 percent year-to-date, could continue to grind higher, analyst Monika Garg said in the note.

A slight beat on net subscription targets, revenues and earnings per share; and a reiteration or modest upward revision to guidance is likely, Garg said, citing positive quarter-end checks with resellers. (See Garg's track record here.) 

Autodesk's M2S — or maintenance to subscriptions conversions — program continues to progress faster than expected and the shift to direct sales channel continues, according to KeyBanc. 

Autodesk is scheduled to report its fiscal third quarter earnings after the market close Tuesday, Nov. 28.

Analysts, on average, expect the company to report a loss of 13 cents per share, narrower than the year-ago loss of 18 cents per share and revenues of $513.47 million, up 4.90 percent year-over-year.

Synopsis To Benefit From Stable EDA Trends, Analysts Say 

Going by Cadence Design Systems In CDNS's results last month, KeyBanc said electronic design automation trends remain stable. The firm projects Synopsis will report in-line to a modest beat in its fiscal fourth quarter.

The company's acquisition of open source security solutions and license management software company Black Duck could lead it to issue above-consensus 2018 revenue guidance, although earnings per share guidance could be lower due to the dilutive impact of the acquisition, according to KeyBanc. 

See also: Jim Cramer Advises His Viewers On Autodesk, Burlington And More

Comparing Synopsis and Cadence, KeyBanc said Synopsis has better growth opportunities, margin expansion opportunities and a lower valuation. The firm also sees tailwinds to both companies from Mentor Graphics Corp MENT's acquisition by Siemens AG (ADR) SIEGY.

"Also, increasing silicon content in autos, autonomous driving, IoT, AI/ML designs, and increasing chip design complexity could provide tailwinds to the EDA industry," according to KeyBanc. 

Synopsis is scheduled to report its results after the market close Wednesday, Nov. 29.

The consensus estimates call for earnings of 57 cents per share on revenues of $650.72 million. In the year-ago quarter, the company reported earnings of 77 cents per share on revenues of $633.72 million.

Guidewire Guiding Higher? 

Guidewire is expected to report in-line fiscal year first quarter results, while the company is likely to raise its 2018 guidance to account for the Cyence acquisition, Garg said. The analyst said she expects the deal to have a 300 basis-point headwind to operating margin in 2018.

Partners at user conferences seem to like the Cyence acquisition — and customers are showing growing interest in moving to the cloud, Garg said. This, according to the analyst, shows Guidewire's cloud initiatives could be working.

Guidewire Software is due to release its quarterly results after the market close Wednesday, Nov. 29.

The Street estimates a loss of 14 cents per share vs. earnings of 2 cents per share last year, while revenues are expected to increase 6.90 percent to $100.61 million.

KeyBanc's Ratings And Price Targets

Autodesk: Overweight/$136
Synopsis: Overweight/$86
Guidewire Software: Overweight /$86

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