Earnings Preview: Autodesk Inc.

Autodesk Inc. (ADSK - Analyst Report) is scheduled to release its fiscal first quarter 2013 results on Thursday, May 17, 2012.

Previous Quarter Highlights

Autodesk reported a strong fourth quarter driven by continued growth in revenues across geographies and robust higher licensing and maintenance revenues. This helped the company to not only surpass the Zacks Consensus Estimate, but also exceed management’s guided range. Despite an improved top-line Autodesk’s bottom line missed the Zacks Consensus Estimate by a penny.

For further details, please read: Autodesk Improves Despite EPS Miss

First Quarter and FY13 Expectations

For first quarter 2013, Autodesk expects revenues in the range of $575.0 million to $590.0 million. Currently, the Zacks Consensus Estimate is pegged at $587.0 million. Earnings (excluding stock based compensation of 10 cents and amortization of 7 cents) is expected to be in the range of 46 cents to 48 cents per share. The Zacks Consensus Estimate is currently pegged at 39 cents per share.

For fiscal 2013, Autodesk expects revenues to be 10% higher than the prior year. Autodesk expects non-GAAP operating margin to improve 130 bps annually. Moreover, management expects the tax rate to remain uniform at 26.5% for both first quarter and fiscal 2013.

Estimate Revision Trend

In the last 30 days, none of the six analysts covering the stock revised their estimates for the first quarter of 2013. We note that Autodesk has posted an average earnings surprise of 1.70% in the trailing four quarters, implying that the company exceeded the Zacks Consensus Estimate by that magnitude in the stated period. We don’t expect a major change in the earnings trend pattern for the current quarter.

For fiscal 2013, out of the 8 analysts covering the stock, one downward revision was witnessed in the last 30 days. This reflects steady growth trends in our view.

Most of the analysts believe that the company’s market share gains and its presence in emerging market. These positives are expected to drive the top-line going forward. Moreover, the acquisitions in the field of CAD and gaming middleware sections will provide the company with long-term opportunities, particularly in the web-based communities that will likely boost the company’s cloud offerings going forward.

Conclusion

Autodesk maintains a dominant position in the computer aided designing market. We believe that Autodesk’s expanding product portfolio, broadening industry applications and geographic reach will help it sustain longer-term growth through the development of high-volume, lower-cost CAD software. We believe that this will likely drive earnings going forward.

Moreover, the company’s expanding cloud computing services portfolio will expand its customer base going forward. The company is also increasing its penetration in the mobile market by developing software for smartphones and Apple Inc’s (AAPL - Analyst Report) iPad. We believe that these initiatives will boost Autodesk’s top-line growth going forward.

However, Autodesk’s high exposure to Europe (40% of revenues) citing the lingering financial turmoil and gloomy economic environment in the region keeps us cautious on the stock. Moreover, customer concentration and increasing competition are the other headwinds.

We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #3 Rank, which translates into a short-term (1-3 months) ‘Hold’ rating.