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Guidewire (GWRE) to Report Q2 Earnings: What's in Store?

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Guidewire Software, Inc. (GWRE - Free Report) is slated to report second-quarter fiscal 2019 earnings on Mar 5. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 190.1%.

Guidewire Software delivered non-GAAP earnings of 36 cents per share in first-quarter fiscal 2019, outpacing the Zacks Consensus Estimate by 20 cents. Notably, it recorded loss of 6 cents in the year-ago quarter.

The company reported revenues of $179.7 million, which surged 66% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $163 million.

This 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, Guidewire stock gained 11.1% year over year, substantially outperforming industry’s rally of 1.5%.

Guidance & Estimates

For second-quarter fiscal 2019, revenues are expected to be $157-$161 million. The Zacks Consensus Estimate for revenues is pegged at $159.6 million.

Non-GAAP net income per share is expected to be 17-21 cents for second-quarter fiscal 2019. The Zacks Consensus Estimate for the same is pegged at 19 cents.

Guidewire updated the fiscal 2019 outlook. The company expects total revenues to be $722-$732 million (previously $740.5-$752.5 million). The Zacks Consensus Estimate for total revenues is pegged at $726.9 million.

For the fiscal year, non-GAAP net income is projected to be $1.24-$1.34 per share (previously $1.15-$1.26). The Zacks Consensus Estimate for the same is pegged at $1.30.

Factors to Consider

The company was recently selected by Optimum General Inc. Notably, Guidewire InsurancePlatform Core products will help Optimum General with the operations of their residential lines of business.

Further, the company recently announced that South Africa-based insurer Santam will deploy its ClaimCenter offering across personal and commercial business domains. We believe that the rapid adoption of Guidewire’s solutions will aid the company to bolster subscription revenues, consequently enabling it to expand its total addressable market or TAM.

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

Notably, the company’s ongoing alliance with Verisk Analytics 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 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 the 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.

Guidewire currently has a Zacks Rank #2 and an Earnings ESP of 0.00%.

Stocks With Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to beat estimates in their upcoming releases.

Turning Point Brands, Inc. (TPB - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Company (ANF - Free Report) has Earnings ESP of +2.28% and a Zacks Rank #2.

The Cooper Companies, Inc. (COO - Free Report) has Earnings ESP of +0.76% and a Zacks Rank #3.

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