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Factors Likely to Influence ANSYS' (ANSS) Earnings in Q4

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ANSYS (ANSS - Free Report) is set to report fourth-quarter 2018 results on Feb 27.

The company beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 17.7%.

In the last reported quarter, ANSYS reported non-GAAP earnings of $1.31 per share (per ASC 606), surpassing the Zacks Consensus Estimate of $1.04. Earnings surged 39% on a year-over-year basis to $1.46 per share, according to ASC 605 standard.

Non-GAAP revenues of almost $293 million (per ASC 606) comfortably surpassed the higher end of the guided range of $265-$285 million. The Zacks Consensus Estimate was pegged at $284 million.

Non-GAAP revenues increased 11.3% (11.9% in constant currency) from the year-ago quarter to $307.9 million, according to ASC 605 standard. Year-over-year revenue growth was driven by double-digit growth across lease, maintenance and service revenues.

What to Expect?

Per ASC 606, ANSYS expects non-GAAP earnings in the range of $1.39 to $1.55 per share for fourth-quarter 2018. Non-GAAP revenues are anticipated in the range of $352 million to $372 million.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.49 per share, reflecting year-over-year increase of 39.3%. Further, the consensus mark for revenues is pegged at $362.1 million, up 19.7% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider

Robust investments in autonomous vehicles, electrification, smart, connected solutions and 5G were a tailwind. Customers’ focus on utilizing simulation across repair, maintenance and other overhaul projects was a positive. Budgetary increase in allocation for defense spending across Europe and the United States favored growth in aerospace and defense domains.

In the last reported quarter, ANSYS unveiled the latest Pervasive Engineering Simulation offerings, named ANSYS 19.2 to accelerate problem-solving capabilities across its comprehensive portfolio. It is anticipated to enhance the company’s go-to-market strategy.

The company’s Startup Program is benefiting more than 500 young companies globally by providing them with ANSYS solutions to build next generation product and services, which is a positive.

ANSYS’ success with RedHawk-SC is evident from its robust adoption by hardware startups. Notably, the company is focused on chip development for artificial intelligence. Further, its RedHawk customers have started deploying the same in their complex products and design. This is expected to benefit the company in the to-be-reported quarter.

Moreover, ANSYS acquired France-based OPTIS. In fact, OPTIS’ feature-rich virtual reality (VR) platform is expected to complement ANSYS’ offerings to help automotive manufacturers supply safer driverless vehicles. Safer navigation is ensured by development of futuristic camera, lidar and radar.

With this buyout, ANSYS is set to introduce ANSYS VRXPERIENCE, which will simulate the vehicle’s reaction to critical situation. This is anticipated to bolster customer experience.

The buyout of 3DSIM, a leading additive manufacturing simulation technology provider, will help ANSYS to foray into 3D metal printing and access the industry's only complete additive manufacturing simulation workflow. This will enhance ANSYS’s presence in the competitive simulations market.

Notably, the backlog for the company in the last reported quarter increased 13.8% year over year to $761.6 million, which is a positive.

However, margin is anticipated to remain under pressure as ANSYS continues to invest in product development.

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.

ANSYS has 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 a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post earnings beat in their upcoming releases:

Live Nation Entertainment, Inc. (LYV - Free Report) has an Earnings ESP of +2.41% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Palo Alto Networks, Inc. (PANW - Free Report) has an Earnings ESP of +0.10% and a Zacks Rank #3.

AMC Entertainment Holdings, Inc. (AMC - Free Report) has an Earnings ESP of +37.7% and a Zacks Rank #3.

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