Will Guidewire (GWRE) Retain Its Beat Streak In Q2 Earnings?

Guidewire Software, Inc. (NYSE:GWRE) is slated to report second-quarter fiscal 2020 results on Mar 4.

For the fiscal second quarter, Guidewire expects revenues of $162-$166 million. The Zacks Consensus Estimate for revenues is pegged at $165.2 million, indicating a decline of 2.4% from the year-ago quarter reported figure.

The Zacks Consensus Estimate for earnings is pegged at 13 cents per share, unchanged over the past 30 days. This suggests a decline of 61.8% from the prior-year quarter.

Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters by 137.32%, on average.

Here’s What the Zacks Model Suggests

Our proven model predicts an earnings beat for Guidewire time around. According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Guidewire has an Earnings ESP of +15.39% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Guidance & Estimates for Q2 in Detail

Guidewire expects License and subscription revenues to be in the range of $92-$96 million. The Zacks Consensus Estimate is pegged at $96 million, compared with $82.4 million reported in the fiscal first quarter.

Maintenance revenues are anticipated to be in the range of $20-$20.5 million. The Zacks Consensus Estimate is pegged at $20.3 million, compared with almost $21 million reported in the prior quarter.

Services revenues are projected between $48 million and $51 million. The Zacks Consensus Estimate is pegged at $49.9 million, compared with $53.6 million in the fiscal first quarter.

Factors Likely to Have Influenced Q2 Results

Robust adoption of cloud-based Guidewire InsurancePlatform products among insurers is likely to have driven the fiscal second-quarter performance. Particularly, growing clout of Guidewire Cloud and ClaimCenter are expected to have contributed to the to-be-reported quarter’s top line.

Markedly, prominent insurers — including the likes of Heartland Farm Mutual, Canada-based insurer, The Co-operators, — selected the company’s InsurancePlatform suite of solutions in the quarter under review. Moreover, Safety Insurance Group adopted Guidewire ClaimCenter, to enhance claims management processes. This is expected to have generated incremental revenues in the to-be-reported quarter.

Notably, an expanding customer base is instilling investor optimism in the stock. Shares of Guidewire have returned 26.9% in the past year, outperforming the industry’s rally of 5.2%.



Management is banking on adoption of InsuranceNow to increase with the roll out of latest InsuranceNow GO offering that accelerates implementation of the solution in a cost-effective manner. Additionally, the cross-selling of product suites is expected to have widened customer base and driven revenues in the fiscal second quarter.

Further, Guidewire’s fiscal second-quarter results are expected to reflect gains from an expanding partner base in the PartnerConnect program. Notably, with the PartnerConnect program, insurers can easily access Guidewire’s Marketplace, which helps them introduce innovative solutions and adapt to changing market demands.

Additionally, the company has been increasing investments to enhance insurance software products via collaborations with leading on-demand cloud infrastructure vendors, including Amazon (NASDAQ:AMZN) Web Services and Microsoft (NASDAQ:MSFT) Azure.

The company has been focused on enhancing Guidewire Cloud platform with new capabilities including digital frameworks, automation, tooling, and other cloud services and leverage Guidewire data platform. The latest functionalities are expected to have bolstered adoption of the company’s InsurancePlatform suite of solutions in the fiscal second quarter.

Nonetheless, increasing expenditure on product enhancements and marketing initiatives is anticipated to have impeded margin expansion in the fiscal second quarter.

Other Stocks that Warrant a Look

Here are some other stocks that you may consider, as our proven model shows that these too have the right combination of elements to beat estimates this time around.

Tencent Holding Ltd. (OTC:TCEHY) has an Earnings ESP of +6.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (NASDAQ:COST) currently has an Earnings ESP of +0.20% and a Zacks Rank of 2.

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +0.02% and a Zacks Rank of 2 at present.

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