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ANSYS (ANSS) to Report Q2 Earnings: What's in the Cards?

ANSYS Inc. ANSS is set to release second-quarter 2017 earnings on Aug 2. Notably, the company has positive record of earnings surprises in the trailing four quarters, with an average surprise of 3.94%.

Last quarter, the company delivered a positive earnings surprise of 3.94%. Revenues increased 12.2% (13% at constant currency) from the year-ago quarter to $253.5 million, surpassing the Zacks Consensus Estimate of $242 million.

For second-quarter fiscal 2017, ANSYS expects non-GAAP earnings in the range of 88–93 cents per share. Net revenue is anticipated in the range of $254–$263 million.

ANSYS’s stock has gained 38.9% year to date, substantially outperforming the 22.3% rally of the industry it belongs to. The outperformance can be attributed to the improving bottom line and positive guidance.

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

Factors to Consider

ANSYS expects the transition from perpetual license contracts to longer term, time-based licenses at some of the company’s largest customers (in mature markets like the U.S. and Japan) to impact software license and maintenance revenues growth in the near term. Moreover, weakness in Europe and adverse foreign currency exchange rates are other major concerns.

ANSYS, Inc. Price and EPS Surprise


ANSYS, Inc. Price and EPS Surprise | ANSYS, Inc. Quote

Nevertheless, we note that ANSYS is a dominant player in the high-end design simulation software market. The company has significant growth opportunity from the rising complexity in product design owing to rapid adoption of IoT in the manufacturing industry. Moreover, growing demand for energy efficient products is also a key catalyst.

Further, collaboration with the likes of Synopsys SNPS and PTC are enabling ANSYS to expand customer base. This is anticipated to boost top-line growth in the going-to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that ANSYS is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Currently, Earnings ESP is +1.19%. This is because the Most Accurate estimate is currently pegged at 85 cents higher than the Zacks Consensus Estimate of 84 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ANSYS carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Kemet Corporation KEM has an Earnings ESP of +11.11% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay Intertechnology VSH has an Earnings ESP of +6.06% and flaunts a Zacks Rank #1.

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