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Here's How Workday (WDAY) Looks Just Ahead of Q4 Earnings

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Workday, Inc. (WDAY - Free Report) is scheduled to report fourth-quarter fiscal 2021 results on Feb 25.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings stands at 55 cents, suggesting growth of 10% from the year-ago reported figure. Notably, the consensus estimate for earnings has remained stable over the past 30 days.

The consensus mark for fiscal fourth-quarter revenues is currently pegged at $1.11 billion, indicating an improvement of 13.8% from the prior-year quarter.

Factors to Consider

Workday’s fiscal fourth-quarter results are likely to reflect gains from strong backlog and solid pipeline, led by robust demand for its cloud-based human capital management (HCM) solutions.

Moreover, coronavirus crisis induced accelerated digital transformation of enterprises taking place across all industries is anticipated to have driven adoption of Workday Adaptive Planning, Workday Prism Analytics and Business Planning Cloud offerings.

Workday, Inc. Price and EPS Surprise

Workday, Inc. Price and EPS Surprise

Workday, Inc. price-eps-surprise | Workday, Inc. Quote

Further, growing clout of Workday People Experience, Workday People Analytics and Workday Extend, integrated with enhanced capabilities might have contributed to the company’s fiscal fourth-quarter performance.

Likewise, innovative feature additions including Workday Assistant, Workday Help and Workday Journeys are expected to have bolstered adoption of its offerings, which in turn may have driven growth in the fiscal fourth quarter.

Also, synergies from Scout RFP and Adaptive Insights acquisitions, and strength in product suite are expected to have benefited the fiscal fourth-quarter performance.

For the fiscal fourth quarter, Workday expects subscription revenues in the range of $991 million to $993 million. The Zacks Consensus Estimate is pegged at $993 million, indicating growth of 18.3% on a year-over-year basis.

Besides, existing partnerships with Microsoft (MSFT - Free Report) with primary focus on Teams and Azure Active Directory, and salesforce’s Work.com are expected to have aided the company acquire more customers as enterprises increasingly seek to optimize employee work. This is likely to have favored the to-be-reported quarter’s performance.

Additionally, the company inked an all-cash transaction to acquire Peakon ApS, which is an employee success platform that converts feedback into actionable insights. It will help Workday in enhancing its platform capabilities with real-time visibility into employee experience, improving employee engagement and boosting organizational performance.

Although investments on acquisitions bode well over the longer haul, increased expenditure on product portfolio expansion and sales and marketing might have limited margin expansion in the fiscal fourth quarter.

Further, coronavirus-induced layoffs due to broader macroeconomic weakness and lower spend from small and medium sized businesses (SMBs) may have negatively impacted contract renewals in the fiscal fourth quarter, which in turn is likely to have acted as a headwind.

Markedly, professional services revenues for the fiscal fourth quarter are projected to be $121 million. The Zacks Consensus Estimate is pegged at $121 million, suggesting a decline of 11.4% on a year-over-year basis.

What Our Model Says

Our proven model predicts an earnings beat for Workday this time around. The 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.

Workday has an Earnings ESP of +1.21% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are some other stocks worth keeping a tab on, as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

CrowdStrike (CRWD - Free Report) has an Earnings ESP of +13.92% and a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Autodesk (ADSK - Free Report) has an Earnings ESP of +2.29% and a Zacks Rank of 2, at present.

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