Post-Election Uncertainty Not Likely A Headwind For Ultimate Software

The Ultimate Software Group, Inc. ULTI is scheduled to report its Q4 2016 results on Feb. 7. Management commentary around bookings would likely be bullish, and the quarterly results may be “in line with to slightly above consensus,” William Blair’s Justin Furby said in a report. He reiterated an Outperform rating on the company.

Takeaway On Post-Election Concerns

There have been investor concerns following disappointing commentary from Automatic Data Processing ADP (Rated: Outperform). Furby mentioned, however, that recent discussions with partners indicated a healthy demand environment, and “none of the partners we spoke with flagged uncertainty post-election as an issue for Ultimate Software.”

Following Donald Trump’s presidential victory in November, there has been investor angst around the impact of a potential repeal of the Affordable Care Act on payroll vendors. These concerns have resulted in a decline in Ultimate Software’s shares by roughly 8 percent since early November.

Although a potential ACA repeal continues to be a risk factor for all payroll companies, “Ultimate Software’s exposure is considerably less than the midmarket-focused payroll vendors,” Furby commented.

“Overall, we peg revenue from ACA at $10 million or slightly higher for Ultimate Software (in 2017), although it is somewhat difficult to estimate,” the analyst wrote.

Management would likely reiterate its fiscal-year 2017 guidance of over 25 percent recurring growth and non-GAAP operating margin of more than 21 percent.