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Is a Beat in the Cards for Workday (WDAY) in Q1 Earnings?

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Workday, Inc. (WDAY - Free Report) is set to report first-quarter 2018 results on May 31. Notably, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 58.65%.

In the last reported quarter, the company delivered fourth-quarter fiscal 2018 non-GAAP earnings of 28 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The figure also improved on a year-over-year basis.

Strong growth can primarily be attributed to 33% jump in revenues, which totaled $582.5 million. The figure outpaced the guidance of $538-$540 million and beat the Zacks Consensus Estimate for revenues of $574 million. The robust top-line performance was driven by solid growth in subscription and professional revenues.

What to Expect

The Zacks Consensus Estimate for the quarter is pegged at 26 cents, down 10.3% year over year. However, the Zacks Consensus Estimate for revenues is pegged at $609.56 million, up roughly 27% from the year-ago quarter.

Workday’s shares have gained 30.8% year over year, substantially outperforming the industry’s 23.9% rally.

Let’s see how things are shaping up prior to this announcement.

Customer Addition & Product Launches: Key Catalyst

Workday extended capabilities and tools in Workday HCM with new customer experience.

The company added 58 financial management customers, up 45% from the year-ago quarter. The clientele now includes two Fortune 500 customers, one of which is a Fortune 100 company. Some other new financial management customers include American Family Mutual Insurance and Quicken Loans.

Further, the company won 60 planning customers. Total planning customers on Workday’s platform totals more than 250 while total number of financial management customers totaled more than 450.

Workday announced the availability of Workday Prism Analytics and Workday Cloud Platform, the first offering delivered on Workday Data-as-a-Service. The company’s foray into the platform-as-a-service market by launching the Workday Data-as-a-Service Platform is expected to further boost the top line.

It was placed in the Leaders quadrant of “Magic Quadrant for Cloud Human Capital Management Suites for Midmarket and Large Enterprises” by Gartner.

Buyouts

Workday announced partnership with Duo Security to integrate the latter’s multi-factor authentication (“MFA”) technology. This will enhance security and improve functionality of Workday’s user interface. This additional level of protection will help the company gain the trust of its users, consequently increasing adoption of its products and ultimately boosting the top line.

Recently, Workday also acquired SkipFlag, marking another step in its efforts to invest in areas such as machine learning, advanced search and natural language processing.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Workday has a Zacks Rank #1 and an Earnings ESP is +7.68%.

Other Stocks With a Favorable Combination

Here are some companies, which, as per our model, also have the right combination of elements to post an earnings beat this quarter:

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +0.95% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Box, Inc. (BOX - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #3.

Palo Alto Networks, Inc. (PANW - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank #3.

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