ANSYS (ANSS) Gears Up For Q3 Earnings: What's In Store?

ANSYS (NASDAQ:ANSS) is scheduled to report third-quarter 2019 results on Nov 6. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 28.3%.

Estimates for Q3

ANSYS expects non-GAAP earnings in the range of $1.15 per share to $1.28 per share for third-quarter 2019. Non-GAAP revenues are anticipated in the range of $320 million to $340 million. Management projects non-GAAP operating margin to be in the range of 39-40% for the third quarter.

The Zacks Consensus Estimate for earnings is pegged at $1.25 per share, suggesting a decline of 4.6% from the year-ago reported quarter. Notably, estimates have remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is currently pegged at $333.5 million, indicating an improvement of 13.8% from the year-ago reported figure.

Q2 at a Glance

ANSYS had reported second-quarter 2019 non-GAAP earnings of $1.61 per share, surpassing the Zacks Consensus Estimate of $1.28. Further, the bottom line surged 19% on a year-over-year basis.

Non-GAAP revenues of almost $370.5 million comfortably outpaced the Zacks Consensus Estimate of $339 million. Non-GAAP revenues increased approximately 20% from the year-ago quarter.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

ANSYS has been witnessing robust demand for simulation software solutions, particularly from automotive end-market, which is likely to have driven the third-quarter top line.

The company’s simulation software has been enabling RFS to design 5G-compliant antennas and Volkswagen (DE:VOWG_p) to accelerate electric vehicle speed. Notably, ANSYS recently announced it is teaming up with BMW Group, which will utilize the company’s simulation tools to design robust AV technologies.

The company recently released ANSYS 2019 R2, in a bid to enable engineers design more pervasive simulation solutions across multiple industries. The incremental adoption of ANSYS’ innovative products is expected to have benefited the top line in the third quarter.

Further, synergies from ANSYS’ strategic acquisitions are expected to have positively impacted the upcoming quarterly results. For instance, Granta Design and Helic buyouts are anticipated to have strengthened portfolio with robust software simulation capabilities.

Notably, the Zacks Consensus Estimate for Maintenance and service revenues is pegged at approximately $199 million, indicating growth of 10.6% from the year-ago reported figure. Meanwhile, consensus for Software Licenses revenues stands at $133 million, suggesting growth of 22% from the year-ago quarter.

However, ANSYS’ continuous investments on product development are likely to get reflected in the third-quarter margins.

Key Development

Further, in the quarter under review, ANSYS inked a deal to acquire Livermore Software Technology Corporation, in a bid to strengthen its explicit dynamics suite and finite element analysis capabilities. With the latest buyout, ANSYS aims to aid developers design cost-efficient and safer vehicles while minimizing costs concerning physical testing.

The acquisition is expected to aid ANSYS in enhancing strength in automotive, avionics and aerospace, and other domains. This is expected to boost ANSYS’ financial performance in the days ahead.

What Does the Zacks Model Say

Our proven model doesn’t conclusively predict an earnings beat for ANSYSthis time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or higher increases the odds of an earnings beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for ANSYSis 0.00%.

Zacks Rank: ANSYScurrently carries a Zacks Rank of #3.

Stocks With Favorable Combination

Here are a few stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Activision Blizzard, Inc (NASDAQ:ATVI) has an Earnings ESP of +24.3% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CVS Health Corporation (NYSE:CVS) has an Earnings ESP of +0.05% and a Zacks Rank #3.

Chesapeake Energy Corporation (NYSE:CHK) has an Earnings ESP of +8.24% and a Zacks Rank #3.

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