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Factors Likely to Influence Guidewire's (GWRE) Q1 Earnings

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Guidewire Software, Inc. (GWRE - Free Report) is slated to report first-quarter fiscal 2019 earnings on Dec 4. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive surprise of 184.4%.

Guidewire delivered fourth-quarter fiscal 2018 non-GAAP earnings of 81 cents per share, outpacing the Zacks Consensus Estimate by 5 cents. Moreover, the figure grew 37.3% year over year.

The company reported revenues of $248.6 million, increasing 37.3% from the year-ago quarter. The figure comfortably outpaced the Zacks Consensus Estimate of $239 million.

The increase can primarily be attributed to growth in Services revenues and License revenues.

Further, strong adoption of several cloud-based products remained a key catalyst.

Notably, the company is transforming to a subscription-based model from a term-license based one, which might hurt the top line in the near term. This is because term license revenues include advance payments while subscription-based revenues are a bit delayed.

Guidewire Software, Inc. Price, Consensus and EPS Surprise

 

Guidewire Software, Inc. Price, Consensus and EPS Surprise | Guidewire Software, Inc. Quote

Guidance & Estimates

For first-quarter 2019, revenues are expected to be in the range of $159-$163 million. The Zacks Consensus estimate is pegged at $162.5 million.

Non-GAAP net income per share is anticipated to be between 18-22 cents. The Zacks Consensus estimate is pegged at 20 cents per share.

Guidewire will adopt ASC 606 from fiscal 2019. The company expects total revenues to be in the range of $740.5-$752.5 million. The Zacks Consensus estimate is pegged at $750 million.

Non-GAAP net income is projected to be between $1.15 cents and $1.26 per share. The Zacks Consensus estimate is pegged at $1.23 per share.

Factors to Consider

Guidewire’s elaborate partnership programs and strategic collaborations are major growth drivers. Its Partner Connect Program has been implemented worldwide, benefiting its customers in the property and casualty insurance industry.

Notably, the company’s ongoing alliance with Verisk Analytics has enabled it to offer robust Guidewire Product Content Management (“GPCM”) service. The move aids Guidewire to deliver robust services benefiting the mutual customer base with digital methods, reducing time to market in cost-effective ways.

The company’s acquisition strategies are also a major contributor to growth. The buyouts of ISCS (now called InsuranceNow), FirstBest (now called Guidewire Underwriting Management) and EagleEye Analytics (now known as Guidewire Predictive Analytics) are not only aiding revenue growth but also helping the company to expand clientele.

Additionally, management is optimistic about the completion of the Cyence buyout. Notably, Cyence is a company that determines the economic impact of a cybercrime via a software platform, which is built on cyber-security related data science. The integration of Cyence would enable Guidewire to provide an entire life cycle to the insurance products starting from designing to transaction management.

Moreover, management is extremely optimistic regarding several cloud-based products launched recently, at a time when the P&C insurance industry is moving steadily toward adoption of cloud solutions.

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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