Aspen Technology (AZPN) Q2 Earnings: What's In The Cards?

Aspen Technology, Inc. (NASDAQ:AZPN) is scheduled to report second-quarter 2019 results on Jan 23. The company has surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive earnings surprise of 12.8%.

In first-quarter 2019, Aspen Technology delivered non-GAAP earnings of 64 cents per share, surpassing the Zacks Consensus Estimate by 9 cents. Moreover, the figure increased 20.8% from the year-ago quarter.

Revenues declined 7% from the year-ago quarter to $114.2 million but beat the consensus estimate of $113 million. The year-over-year decrease in revenues was owing to lower total bookings on account of a decline in term license contracts.

Notably, the company’s Engineering suite delivered one of its strongest performance in approximately three years. Moreover, Aspen Technology witnessed increased demand from E&C customers and Latin America customers.

What to Expect?

For second-quarter 2019, the Zacks Consensus Estimate for earnings was pegged at 66 cents per share representing an increase of 11.9% on a year-over-year basis.

The Zacks Consensus Estimate for revenues is pegged at approximately $120.4 million, indicating a decline of around 3.6% from the year-ago quarter.

Aspen Technology forecasts revenues between $540 million and $564 million for fiscal 2019. Non- GAAP earnings are projected in the range of $3.19 to $3.48 per share.

Notably, the company’s shares have gained 16.8% year over year, substantially outperforming the industry’s rally of 11.3%.

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

Factors Impacting Q2 Results

Aspen Technology has been securing notable customer wins on the back of its strength in asset optimization and management solutions.

Recently, the company announced that Thailand-based SCG, a provider of comprehensive packaging solutions, intends to deploy Aspen Mtell software to reduce unplanned downtime.Management remains elated on the growing clout of Mtell offering which is reinforcing the company’s presence globally.

The company is also witnessing increased demand from E&C customers and Latin America customers.

The APM suite continues to gain traction, with the company signing significant deals globally. The company also witnessed pipeline expansion, which is a positive.

In the last reported quarter, Energy, Engineering & Construction (E&C) and Chemicals represented 90% of the business wherein Energy was the largest contributor, followed by Chemicals and E&C.

Moreover, the company witnessed an increase in E&C customers due to lower attrition of customers due for renewal.

However, Aspen Technology generates significant revenues from energy, chemicals and E&C verticals, characterized with manufacturing complexity and high capital costs.

Reduced capital expenditure in the energy vertical remains a concern despite the company’s attempts to mitigate these risks by exploring new domains.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Aspen Technologyhas a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are a few stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

The Progressive Corporation (NYSE:PGR) has an Earnings ESP of +1.57% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Rollins, Inc. (NYSE:ROL) has an Earnings ESP of +3.03% and a Zacks Rank #1.

TD Ameritrade Holding Corporation (NASDAQ:AMTD) has an Earnings ESP of +0.62% and a Zacks Rank #3.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>