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Factors Expected to Influence Workday's (WDAY) Q3 Earnings

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Workday, Inc. (WDAY - Free Report) is set to report third-quarter fiscal 2019 results on Nov 29. Notably, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive surprise of 34.9%.

Workday delivered second-quarter fiscal 2019 non-GAAP earnings of 31 cents per share, beating the Zacks Consensus Estimate of 26 cents. The figure also improved 29.2% year over year.

Strong growth can primarily be attributed to a jump of 27.9% in revenues, which totaled $671.7 million. The figure surpassed the Zacks Consensus Estimate for revenues of $663 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 under review is pegged at 15 cents, down 37.5% year over year. However, the Zacks Consensus Estimate for revenues is pegged at $723.1 million, up roughly 30.2% from the year-ago quarter.

Workday’s shares have gained 32.9% on a year to date basis, against the industry's decline of 5.3%.

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

Factors Likely to Impact Q3 Results

Workday has enriched customer experience with extended capabilities and tools in Workday HCM.

Workday has more than 2,200 customers. During the last reported quarter, the company added Eli Lilly and Company, Bridgestone Americas, Siemens Healthineers and DBS Bank as its new HCM customers. The clientele now includes two Fortune 500 customers, one of which is a Fortune 100 company.

The company was ranked #4 on the list of the 100 Best Workplaces for Millennial by Fortune and Great Place to Work Institute. Additionally, the company was ranked #6 on the list of the Best Large Workplaces in Europe by Great Place to Work Institute.

The company also acquired Stories.bi and Rallyteam during the to-be-reported quarter. Both the companies have know-how in leveraging machine learning to power Workday products in order to drive customer satisfaction.

The company also signed an agreement to acquire all outstanding shares of Adaptive Insights. The purchase is likely to aid Workday pursue its goal of emerging as an industry leader in better business decisions, operational expertise, and evolve as a provider of enterprise-level software solutions for financial management and human resource domains. With Adaptive Insight, Workday aims to better plan, execute and aid organizations in driving their financial and business changes.

Workday also partnered Duo Security and SkipFlag. We believe improving customer satisfaction rate and recent buyouts bodes well for the company’s growth in the near term.

However, intensifying competition from peers and higher marketing expenditure are major headwinds in the near term.

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 #3 and an Earnings ESP of 0.00%.

Stocks With a Favorable Combination

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

Science Applications International Corporation (SAIC - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackRock, Inc. (BLK - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank #3.

SLM Corporation (SLM - Free Report) has an Earnings ESP of +0.75% and a Zacks Rank #3.

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