Back to top

Image: Bigstock

Will Top-Line Expansion Boost Workday's (WDAY) Q3 Earnings?

Read MoreHide Full Article

Workday, Inc. (WDAY - Free Report) is set to release third-quarter fiscal 2024 results on Nov 28, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 14.40%. It pulled off a trailing four-quarter earnings surprise of 15.38% on average.

The Pleasanton, CA-based organization is expected to record higher revenues year over year, backed by the growing adoption of its finance and human capital management (HCM) solutions. The introduction of advanced AI capabilities in its products and collaboration with industry-leading enterprises to augment product innovation are tailwinds.

Factors at Play

During the third quarter, Workday unveiled state-of-the-art AI-powered features to enhance the capability of Workday Adaptive Planning solution. The software is designed to simplify complex planning requirements in the finance and human resource domain for businesses across all industries.

The newly-introduced generative AI capability enables planners to validate unlimited scenarios with ease before implementing them into the operational workflow. Leveraging machine learning models, its predictive forecaster rapidly generates demand forecasts within a user-friendly interface. This is likely to have had a positive impact on Workday’s third-quarter performance.

In the quarter-under-review, Workday extended its partnership with ADP, a global leader in HCM solutions, to address the rising incompatibility between HR and payroll systems across industries. The collaboration aims to offer greater visibility across the organization’s HCM environment, including compliance, tax and payroll, ensuring a more streamlined experience for payroll administrators. This will likely boost the top line during the quarter.

In the fiscal third quarter, prominent education institutions, including DePauw University, Medical College of Wisconsin and the University of Florida, have opted to deploy Workday Student and Workday products to optimize finance and human capital management. Workday also extended its collaboration with Accenture to expedite the development of financial management solutions. The collaboration integrates Workday’s technology platform, foundational data model and advanced analytics with Accenture's industry expertise. Salesforce, a leading provider of customer relationship management software, utilized Accenture design and execution support with Workday’s financial management tools. This is likely to have generated incremental revenues in the quarter.

Our estimate for Subscription Services revenues is pegged at $1,678.5 million, suggesting 17.2% year-over-year growth. Our estimate for Professional Services revenues is pegged at $165.1 million.

For the October quarter, the Zacks Consensus Estimate for revenues is pegged at $1,844 million, indicating growth from the year-ago quarter’s reported figure of $1,599 million. The consensus estimate for adjusted earnings per share is pegged at $1.40, suggesting an increase from 99 cents reported in the prior-year quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Workday for the fiscal third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at $1.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Workday, Inc. Price and EPS Surprise


Workday, Inc. Price and EPS Surprise

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


Zacks Rank: Workday currently carries a Zacks Rank #2.

Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this season:

Marvell Technology (MRVL - Free Report) has an Earnings ESP of +0.18% and carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Snowflake Inc. (SNOW - Free Report) has an Earnings ESP of +67.33% and a Zacks Rank of 2. The company is set to report its quarterly numbers on Nov 29.

American Woodmark Corporation (AMWD - Free Report) has an Earnings ESP of +14.30% and carries a Zacks Rank of 3. The company is set to report its quarterly numbers on Nov 30.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Published in