Can Autodesk (ADSK) Maintain Its Earnings Streak In Q1?

Autodesk Inc. (NASDAQ:ADSK) is set to report fiscal first-quarter 2019 results on May 24.

In the last reported quarter, the company reported non-GAAP loss of 9 cents per share, narrower than the Zacks Consensus Estimate of a loss of 12 cents. The figure was also better than the company’s guided range of a loss of 10-14 cents per share.

Notably, the company has a positive earnings surprise track record. It beat estimates in each of the trailing four quarters, delivering an average positive surprise of 21.7%.

Revenues of $553.8 million beat the consensus mark of $545.3 million and increased nearly 15.7% year over year. The figure surpassed the guided range of $537-$547 million.

Let's see how things are shaping up for this announcement.

Key Factors

Autodesk’s results are expected to be driven by its core business, which comprises maintenance, product subscription and Enterprise Business Agreement (EBA) subscriptions.

Autodesk is gaining from robust growth in product subscription. Autodesk’s broad product portfolio continues to generate new customers in both domestic and overseas markets. The company’s growing maintenance to subscription program coupled with increasing adoption of Collections is a tailwind.

Moreover, increasing spend by customers of Collections is leading to an increase in the company’s average recurring revenues (ARR) and average revenue per subscriptions (ARPS).

For the first quarter, the Zacks Consensus Estimate for ARR is $2.12 billion, up 21.7% from the reported number in the year-ago quarter.

Autodesk is also benefiting from its investment in digital infrastructure. The company’s e-store generated nearly 20% of products subscription sales in the last reported quarter. Moreover, half of AutoCAD LT subscriptions in the United States came through the e-store.

Although cloud remains a very small contributor to Autodesk’s total business, growing momentum of BIM 360 and Fusion tools is a positive.

However, churn rate for maintenance subscribers is expected to remain high, given the rise in cost of staying on a maintenance plan.

Management expects billings growth in the quarter to be impacted by tough year-over-year comparison as the company recorded strong billings in the first quarter of fiscal 2018.

Further, cash flow in the quarter will be negatively impacted by the company’s restructuring activity and exit tax related to the shift of European operations center to Dublin from Switzerland.

What Our Model Says

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

Autodesk has a Zacks Rank #3 and its Earnings ESP is +23.08%. Therefore, the company is likely to deliver a positive surprise this quarter.

Other Stocks With a Favorable Combination

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release.

NetApp, Inc. (NASDAQ:NTAP) has an Earnings ESP of +2.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXC Technology Company. (NYSE:DXC) has an Earnings ESP of +1.06% and a Zacks Rank #2.

Nutanix Inc. (NASDAQ:NTNX) has an Earnings ESP of +2.98% and a Zacks Rank #3.

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