Workday Puts In A Hard Quarter's Work

Wells Fargo maintained its Market Perform rating on Workday Inc WDAY despite the company reporting better-than-expected fourth quarter results on reacceleration in customer activity following a slowdown in the third quarter.

For the fourth quarter, Workday reported EPS of $0.07 and $436.7 million in revenue versus consensus expectations of EPS of -$0.01 and $430.4 million in revenue, respectively. Billings equaled $646.4 million, above consensus expectations of $635.4 million.

Workday provided first quarter guidance of $392-$393 million in subscription revenue, $467-$468 million in total revenue, and operating margin of 8.0-9.0 percent. Additionally, the company issued FY2018 guidance of $1.68-$1.7 billion in subscription revenue, and $2.005-$2.025 billion in total revenue.

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Analyst Philip Winslow is positive on Workday's "unified" architecture, which it views as “a more elegant approach” versus the "integrated" systems from SAP and Oracle. But, the analyst expects company to gain share at a slower pace versus prior years.

“We view Workday’s results as supporting our thesis that the company’s product portfolio will enable the company to gain share in the HCM, payroll, financials, and EPM (Enterprise Performance Management) markets—but do so at a slowing pace as compared to previous years,” analyst Philip Winslow wrote in a note.

At last check, shares of Workday fell 7.35 percent to $83.50. Winslow has a valuation range of $75 to $80.