Software Stocks Earnings Slated On Nov 3: ANSS, CSOD & More

As of Nov 1, 332 S&P 500 members representing 74.1% of the index’s total market capitalization have already reported their third-quarter results.

While total earnings for these companies are up 1.9% on a year-over-year basis (72.9% of the companies beat EPS estimates), total revenue increased 1.3% on a year-over-year basis (55.4% of the companies beat top-line estimates). Notably, after five consecutive quarters of decline, earnings are finally back in the positive territory.

As per the latest Zacks Earnings Outlook report, overall third-quarter earnings for S&P 500 companies are anticipated to be up 2.1% (compared to an earlier estimate of a rise of 1.4%) from the year-ago quarter on revenues that are estimated to increase 1.4%.

The growth is expected to be driven by solid results from the finance sector, driven by robust performance from big names like J.P. Morgan and Goldman Sachs (NYSE:GS). Finance’s impressive show is anticipated to mitigate sluggish growth from the energy, autos, transportation and technology sectors.

However, technology earnings growth is expected to remain muted due to disappointing results from Apple (NASDAQ:AAPL) . Although the iPhone maker beat fourth-quarter 2016 earnings estimates by a penny, we note that earnings declined 15% on a year-over-year basis as revenues fell 9.9%.

Software stocks comprise an important component of the technology sector and are expected to follow the same earnings growth trajectory in the quarter. The growing adoption of cloud, Internet of Things (IoT) and Big Data analytics are the key drivers of the industry.

Here we take a look at four software companies set to report earnings on Nov 3:

Ansys, Inc. (NASDAQ:ANSS) is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%.

This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat earnings. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Ansys develops and globally markets engineering simulation software and technologies widely used by engineers and designers across a broad spectrum of industries.

During the quarter, Intel (NASDAQ:INTC) Custom Foundry certified Ansys’ 10 nanometer third-generation tri-gate process simulation tools. Ansys also signed an enterprise license agreement with Flowserve (NYSE:FLS) to make use of the digital twins technology for improved efficiency and reliability while cutting down on risk.

However, foreign currency risk and interest rate risk are the factors that can adversely affect its earnings in the third quarter.

We note that Ansys’ results compared favorably with the Zacks Consensus Estimate in all of the last four quarters, resulting in an average positive surprise of 4.42%.

Cornerstone OnDemand, Inc. (NASDAQ:CSOD) too is unlikely to beat third-quarter 2016 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cornerstone OnDemand is a provider of a comprehensive learning and talent management solution delivered as software-as-a-service.

Though adoptions of the company’s talent management solutions by Los Angeles Rams and ResCare during the quarter are positives for the company, interest rate risk, foreign currency risk, inflation risk and counterparty risk are the factors that can adversely affect its earnings in the third quarter.

Notably,Cornerstone’s results have beaten the Zacks Consensus Estimate in two out of the trailing four quarters with an average positive surprise of 5.76%.

Open Text Corporation (NASDAQ:OTEX) is also unlikely to beat its first-quarter fiscal 2017 earnings estimates as it has an unfavorable combination of a Zacks Rank #3 and an Earnings ESP of 0.00%.Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

During the quarter, Open Text witnessed adoptions of its enterprise information management solutions by the likes of Cooper Tire & Rubber Company and Vital, the Singapore Government's center for shared services. The company also completed the acquisition of the Customer Communications Management assets from HP Inc. (NYSE:HPQ) . Open Text also entered into a definitive agreement to acquire Dell EMC (NYSE:EMC)'s Enterprise Content Division, including Documentum.

More recently, in September, the company launched OpenText Exstream to better address the demands of the digital world.

While acquisitions are likely to bolster the company’s array of technologies, products and capabilities, growing competition from cloud based service provides remains a matter of concern in the to-be reported quarter.

We note that Open Text’s results have missed the Zacks Consensus Estimate in two out of the four trailing quarters with an average negative earnings surprise of 0.55%.

On the other hand, ACI Worldwide, Inc. (NASDAQ:ACIW) has got the odds in its favor to beat third-quarter 2016 earnings estimates as it has a favorable combination of a Zacks Rank #3 and an earnings ESP of +6.25%.

The company develops, markets, installs and supports a broad line of software products and services primarily focused on facilitating electronic payments and electronic commerce.

We are encouraged by increased adoptions of the company’s payments technologies by the likes of Computer Services, Inc. and Erste Bank, Hungary during the quarter, which are likely to drive its top-line performance this time around.

Notably, ACI Worldwide’s results have beaten the Zacks Consensus Estimate in two out of the preceding four quarters. It has an average negative surprise of 34.00%.

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