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What's in the Cards for Workiva (WK) This Earnings Season?

Workiva Inc. WK is set to report third-quarter 2017 results on Nov 7. Although the company reported loss in each of the trailing four quarters, it surpassed the Zack Consensus Estimate on all occasions, delivering an average positive surprise of 48.21%.

Last quarter, the company reported a loss of 14 cents per share, narrower than the Zacks Consensus Estimate of a loss of 19 cents.

Revenues increased 14.8% year over year to $49.4 million and beat the Zacks Consensus Estimate of $48 million.

For third-quarter 2017, total revenue is expected to be in the range of $50.4-$50.8 million. Non-GAAP net loss is anticipated to be in the range of 29-30 cents per share.

The company’s intuitive cloud platform, Wdesk, which is used for collecting, integrating, managing and analyzing business data, continues to gain traction and is expected to aid top-line growth in the soon-to-be reported quarter.

Workiva stock has gained 65.2% year to date, substantially outperforming the 29.5% rally of the industry it belongs to.

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

Factors at Play

Workiva is enjoying steady demand for its product from state and local government and universities. The company announced during the quarter that Wdesk has been adopted by the California Public Employees’ Retirement System (CalPERS) for the purpose of creating the Comprehensive Annual Financial Report (CAFR) for its $330 billion worth fund.

During the quarter, Workiva partnered with EisnerAmper, one of the top 20 advisory and accounting firms in the United States. The duo will be working toward making the documentation process easier and less time consuming for EisnerAmper’s clients related to internal controls and other risk and governance processes. It will also help in the smooth implementation of financial controls related to Sarbanes-Oxley (SOX) Act’s regulations.

Recently, Workiva also entered into a strategic partnership with Business Wire, a globally recognized name in press release distribution and regulatory disclosure. The partnership intends to streamline the process of submission of earnings releases and other financial disclosures by companies directly to Business Wire.

However, intensifying competition from peers like Oracle ORCL, SAP Business One, Adaptive Planning and OIKOS Treasury Suite is a concern for the company.

Workiva Inc. Price and EPS Surprise

Workiva Inc. Price and EPS Surprise | Workiva Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Workiva is likely to beat earnings estimates 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. This is not the case here as you will see below:

Zacks ESP: Workiva’s Earnings ESPis 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 31 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Workiva’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

Stocks to Consider

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

Adobe Systems Inc. ADBE has an Earnings ESP of +0.25% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corp. NVDA has an Earnings ESP of +0.71% and carries a Zacks Rank #1.

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