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Workday (WDAY) Gearing Up for Q1 Earnings: What's in Store?

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Workday, Inc. (WDAY - Free Report) is set to report first-quarter fiscal 2021 results on May 27.

The consensus mark for fiscal first-quarter earnings is pegged at 48 cents, which suggests growth of 11.6% from the year-ago reported figure. Notably, the consensus estimate for earnings has remained stable over the past 30 days.

The Zacks Consensus Estimate for fiscal first-quarter revenues is currently pegged at $1 billion, indicating an improvement of 21.4% from the prior-year quarter.

Notably, the company beat estimates in the trailing four quarters by 23.8%, on average.

Workday, Inc. Price and EPS Surprise

Guidance & Estimates in Detail

For fiscal first quarter, Workday expects subscription revenues in the range of $873-$875 million. The Zacks Consensus Estimate is pegged at $869 million, indicating growth of 24% on a year-over-year basis.

Further, professional services revenues are projected to be $137 million. The Zacks Consensus Estimate is pegged at $133 million, suggesting an improvement of 7.3% on a year-over-year basis.

Factors Likely to Have Influenced Q1 Performance

Workday’s fiscal first-quarter performance is likely to have benefited from high demand for its cloud-based human capital management (HCM) and financial management solutions, driven by digital transformation of enterprises taking place across all industries.

Notably, in the last reported quarter, the company’s HCM solutions were adopted by major players like Southwest Airlines and Wells Fargo Bank, while its financial solutions were adopted by the likes of KeyBanc, and Dun & Bradstreet.

Moreover, growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings is likely to have contributed to the company’s fiscal first-quarter performance.

Also, solid traction across European markets like Germany, Austria and Switzerland, as well Australia and New Zealand is likely to have driven subscription revenue growth in the fiscal first quarter backed by adoption of the company’s software solutions.

Further, strong synergies from the acquisition of Scout RFP, which concluded in the fourth quarter, are likely to have boosted top-line growth in the to-be reported quarter.

However, increased expenditure on sales and marketing is likely to have limited margin expansion in the fiscal first quarter. Additionally, coronavirus-induced uncertainties prevailing in the market are expected to have been a headwind.

What Our Model Says

Our proven model predicts an earnings beat for Workday this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Workday has an Earnings ESP of +12.97% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a few stocks that you may consider, as our proven model shows that these also have the right combination of elements to post an earnings beat this quarter.
Nutanix Inc. (NTNX - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CrowdStrike Holdings (CRWD - Free Report) has an Earnings ESP of +3.57% and a Zacks Rank of 2. (CRM - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank of 3.

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