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4 Software Stocks Likely to Top Earnings Estimates This Season
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Software stocks benefited from the pandemic-induced strong demand for cloud-based services from businesses looking to operate amid lockdowns. However, weakened consumer spending amid ongoing macroeconomic headwinds is hurting industry participants. Enterprises are postponing their large IT spending plans due to a weakening global economy amid inflationary pressure, higher interest rates and unfavorable forex. These do not bode well for industry participants this earnings season.
However, the growing proliferation of SaaS-based services, the rapid migration to cloud platforms, low yet continued spending by enterprises on software procurement, the solid adoption of video-conferencing software and the rising user penetration of online payment solutions are likely to have remained major tailwinds for software companies like Workday (WDAY - Free Report) , CACI International (CACI - Free Report) , BILL Holdings (BILL - Free Report) and HUYA Inc. (HUYA - Free Report) .
Prospects Remain Solid for Software Stocks
The spike in the adoption of cloud-based services, the increasing proliferation of IoT and AR/VR devices and the accelerated deployment of 5G are expected to have aided the performance of software stocks this earnings season.
Strong momentum across enterprise collaboration software, remote desktop tools, natural language processing tool, time tracking tools and cybersecurity software is expected to have hugely favored the software industry this earnings season.
Additionally, the growing proliferation of AI-powered voice recognition, telemedicine, learning management, infrastructure monitoring and business spend management software is expected to have benefited industry players in the quarter under review. Further, enterprise workspace solutions, enterprise communication platforms and online education portals, which have been high in demand throughout 2021 and 2022, are likely to have contributed well.
How to Make the Right Choice?
With the presence of several industry participants, finding the right tech stocks with the potential to beat on earnings can be daunting. However, our proprietary methodology makes this task fairly simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
4 Tech Stocks That Match the Criteria
Workday is slated to report second-quarter fiscal 2024 results on Aug 24. The company currently sports a Zacks Rank #1 and has an Earnings ESP of +2.39%. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.77 billion, indicating year-over-year growth of 15.5%. The consensus mark for earnings stands at $1.24 per share, suggesting a whopping 49.4% increase from the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Workday revenue growth continues to be driven by the high demand for its HCM and financial management solutions. WDAY’s cloud-based business model and expanding product portfolio have been the primary growth drivers.
A strong emphasis on the integration of generative AI into Workday’s products and developing various AI-driven applications to drive more value is a tailwind. Partnership expansion with Alight to deliver an integrated payroll experience to customers across Europe is likely to strengthen its global footprint. In addition, Workday is expanding its portfolio beyond core HCM solutions into the financial domain.
CACI is scheduled to report fourth-quarter fiscal 2023 results on Aug 9. The company currently has an Earnings ESP of +2.36% and a Zacks Rank #2. The Zacks Consensus Estimate for revenues and earnings is pegged at $1.72 billion and $4.85 per share, respectively. The consensus mark for fourth-quarter top and bottom lines implies a year-over-year improvement of 4.5% and 6.8%, respectively.
CACI has been benefiting from new business wins and organic expansions. It has a large pipeline of new projects and continues to win more deals at regular intervals. Having the government as a big client lends stability to the business and moderates fluctuations in revenues. CACI’s sustained focus on its strategy to grow in larger markets and leverage mergers and acquisitions to further increase its market share and create long-term value for its shareholders is praiseworthy.
BILL Holdings is scheduled to report fourth-quarter fiscal 2023 results on Aug 17. The company carries a Zacks Rank #2 and has an Earnings ESP of +4.35%. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $279.6 million, which calls for a year-over-year increase of 39.6%. The consensus mark for earnings stands at 41 cents per share, indicating a robust improvement from the year-ago quarter’s loss of 3 cents per share.
BILL Holdings is benefiting from an expanding small and medium business clientele, as well as a diversified business model. Its large-scale two-sided network simplifies operations and offers automation and multiple payment choices for both sides of a transaction within a secure and frictionless experience. Bill.com is leveraging AI that makes its solutions easier to use, more automated and predicted. It is also working on integrating generative AI into its solutions to enhance customer experience.
HUYA is slated to report second-quarter 2023 results on Aug 15. It currently carries a Zacks Rank #3 and has an Earnings ESP of +300.00%. The Zacks Consensus Estimate for revenues is pegged at $288.2 million, while the same for the bottom line stands at a penny per share. In the year-ago quarter, the company generated $339.7 million of revenues and reported break-even earnings.
HUYA operates game live-streaming platforms in China. The company offers interactive video broadcast service, which includes e-sports, music, reality show and more. HUYA's comprehensive content offerings are driving its mobile user base. New game launches and an expanding content creator base have been a tailwind.
Image: Bigstock
4 Software Stocks Likely to Top Earnings Estimates This Season
Software stocks benefited from the pandemic-induced strong demand for cloud-based services from businesses looking to operate amid lockdowns. However, weakened consumer spending amid ongoing macroeconomic headwinds is hurting industry participants. Enterprises are postponing their large IT spending plans due to a weakening global economy amid inflationary pressure, higher interest rates and unfavorable forex. These do not bode well for industry participants this earnings season.
However, the growing proliferation of SaaS-based services, the rapid migration to cloud platforms, low yet continued spending by enterprises on software procurement, the solid adoption of video-conferencing software and the rising user penetration of online payment solutions are likely to have remained major tailwinds for software companies like Workday (WDAY - Free Report) , CACI International (CACI - Free Report) , BILL Holdings (BILL - Free Report) and HUYA Inc. (HUYA - Free Report) .
Prospects Remain Solid for Software Stocks
The spike in the adoption of cloud-based services, the increasing proliferation of IoT and AR/VR devices and the accelerated deployment of 5G are expected to have aided the performance of software stocks this earnings season.
Strong momentum across enterprise collaboration software, remote desktop tools, natural language processing tool, time tracking tools and cybersecurity software is expected to have hugely favored the software industry this earnings season.
Additionally, the growing proliferation of AI-powered voice recognition, telemedicine, learning management, infrastructure monitoring and business spend management software is expected to have benefited industry players in the quarter under review. Further, enterprise workspace solutions, enterprise communication platforms and online education portals, which have been high in demand throughout 2021 and 2022, are likely to have contributed well.
How to Make the Right Choice?
With the presence of several industry participants, finding the right tech stocks with the potential to beat on earnings can be daunting. However, our proprietary methodology makes this task fairly simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this favorable mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
4 Tech Stocks That Match the Criteria
Workday is slated to report second-quarter fiscal 2024 results on Aug 24. The company currently sports a Zacks Rank #1 and has an Earnings ESP of +2.39%. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.77 billion, indicating year-over-year growth of 15.5%. The consensus mark for earnings stands at $1.24 per share, suggesting a whopping 49.4% increase from the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Workday revenue growth continues to be driven by the high demand for its HCM and financial management solutions. WDAY’s cloud-based business model and expanding product portfolio have been the primary growth drivers.
A strong emphasis on the integration of generative AI into Workday’s products and developing various AI-driven applications to drive more value is a tailwind. Partnership expansion with Alight to deliver an integrated payroll experience to customers across Europe is likely to strengthen its global footprint. In addition, Workday is expanding its portfolio beyond core HCM solutions into the financial domain.
Workday, Inc. Price and EPS Surprise
Workday, Inc. price-eps-surprise | Workday, Inc. Quote
CACI is scheduled to report fourth-quarter fiscal 2023 results on Aug 9. The company currently has an Earnings ESP of +2.36% and a Zacks Rank #2. The Zacks Consensus Estimate for revenues and earnings is pegged at $1.72 billion and $4.85 per share, respectively. The consensus mark for fourth-quarter top and bottom lines implies a year-over-year improvement of 4.5% and 6.8%, respectively.
CACI has been benefiting from new business wins and organic expansions. It has a large pipeline of new projects and continues to win more deals at regular intervals. Having the government as a big client lends stability to the business and moderates fluctuations in revenues. CACI’s sustained focus on its strategy to grow in larger markets and leverage mergers and acquisitions to further increase its market share and create long-term value for its shareholders is praiseworthy.
CACI International, Inc. Price and EPS Surprise
CACI International, Inc. price-eps-surprise | CACI International, Inc. Quote
BILL Holdings is scheduled to report fourth-quarter fiscal 2023 results on Aug 17. The company carries a Zacks Rank #2 and has an Earnings ESP of +4.35%. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $279.6 million, which calls for a year-over-year increase of 39.6%. The consensus mark for earnings stands at 41 cents per share, indicating a robust improvement from the year-ago quarter’s loss of 3 cents per share.
BILL Holdings is benefiting from an expanding small and medium business clientele, as well as a diversified business model. Its large-scale two-sided network simplifies operations and offers automation and multiple payment choices for both sides of a transaction within a secure and frictionless experience. Bill.com is leveraging AI that makes its solutions easier to use, more automated and predicted. It is also working on integrating generative AI into its solutions to enhance customer experience.
BILL Holdings, Inc. Price and EPS Surprise
BILL Holdings, Inc. price-eps-surprise | BILL Holdings, Inc. Quote
HUYA is slated to report second-quarter 2023 results on Aug 15. It currently carries a Zacks Rank #3 and has an Earnings ESP of +300.00%. The Zacks Consensus Estimate for revenues is pegged at $288.2 million, while the same for the bottom line stands at a penny per share. In the year-ago quarter, the company generated $339.7 million of revenues and reported break-even earnings.
HUYA operates game live-streaming platforms in China. The company offers interactive video broadcast service, which includes e-sports, music, reality show and more. HUYA's comprehensive content offerings are driving its mobile user base. New game launches and an expanding content creator base have been a tailwind.
HUYA Inc. Sponsored ADR Price and EPS Surprise
HUYA Inc. Sponsored ADR price-eps-surprise | HUYA Inc. Sponsored ADR Quote