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Why Is Aspen Technology (AZPN) Down 1.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Aspen Technology (AZPN - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Aspen Technology due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Aspen Technology Q4 Earnings & Revenues Beat Estimates

Aspen Technology reported fourth-quarter fiscal 2020 non-GAAP earnings of $1.54 per share that surpassed the Zacks Consensus Estimate by 30.5% but declined 3.1% on a year-over-year basis.

Revenues of $199.3 million beat the Zacks Consensus Estimate by 12.8% and improved 1.8% from the year-ago quarter’s figure. Uptick in contract renewals, as economies reopened, drove year-over-year growth.

As of Jun 30, 2020, the total contract value or TCV amounted to $2.76 billion, compared with $2.57 billion as of Jun 30, 2019.

Total bookings were $236.2 million, down 2% year over year.

The fiscal fourth-quarter performance highlights the indispensability of the company’s product portfolio and its business resilience amid the COVID-19 induced macroeconomic weakness.

Quarter in Detail

License revenues (73.9% of revenues) declined 0.9% year over year to $147.2 million.

Maintenance revenues (22.9%) increased 15.8% year over year to $45.7 million.

Services and other revenues (3.2%) declined 17.9% from the year-ago quarter’s figure to $6.4 million.

Annual spend increased 9.6% year over year to $593 million.

Margins

Gross profit increased 2.2% year over year to $184.2 million. As a percentage of total revenues, the figure expanded 30 basis points (bps) on a year-over-year basis to 92.4%.

Total operating expenses climbed 2.1% from the year-ago quarter’s figure to $70.5 million due to increase in research & development and general & administrative expenses.

Non-GAAP operating income of $122.9 million improved 2.5% year over year. Non-GAAP operating margin was 61.7%, which expanded 40 bps on a year-over-year basis.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash and cash equivalents were $287.8 million compared with $192.2 million as of Mar 31, 2020.

The company generated $99.7 million cash from operations during the quarter under review compared with $81.4 million in the previous quarter. Free cash flow was $99.5 million compared with $81.2 million in the prior quarter.

The company did not repurchase any shares in fourth-quarter fiscal 2020. However, the company will resume stock repurchase program. Recently, the company’s board of directors authorized share repurchase of up to $200 million for fiscal year 2021.

Fiscal 2021 View

For fiscal 2021, Aspen Technology expects revenues in the range of $704-$754 million. The Zacks Consensus Estimate for revenues is pegged at $598.94 million.

Non-GAAP net income is anticipated in the range of $4.78-$4.83 per share. The consensus mark for earnings stands at $3.20.

Management projects non-GAAP operating income in the range of $374-$420 million. Free cash flow is anticipated between $260 million and $270 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 26.92% due to these changes.

VGM Scores

At this time, Aspen Technology has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Aspen Technology has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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