Autodesk Inc. (ADSK) reported fourth quarter 2012 earnings of 37 cents per share, a penny shy of the Zacks Consensus Estimate. However, earnings per share, including stock-based compensation but excluding one-time charges increased 27.6% year over year on the back of revenue growth across all geographies and business segments.

Revenue

Revenues increased 12.3% year over year to $592.4 million in the reported quarter and surpassed the Zacks Consensus Estimate of $584.0 million. Revenues were also ahead of management’s guided range of $575.0 million to $590.0 million.

The year-over-year growth in revenues was driven by higher license and other revenues (62.5% of total revenue), which increased 12.3% from the year-ago quarter to $370.2 million. Maintenance revenues (37.5% of total revenue) rose 12.2% year over year to $222.2 million in the quarter. Moreover, robust business across all geographies, particularly from America, boosted revenues as well demand for suites in the quarter.

On a segmental basis, Platform Solutions and Emerging Business (PSEB) revenues jumped 18.0% year over year to $214.0 million in the reported quarter.

Revenues from the Architecture, Engineering and Construction (AEC) business segment were $175.0 million, up 8.0% year over year while Manufacturing revenues increased 11.0% year over year to $148.0 million in the quarter. Revenues from the Media and Entertainment business rose 7.0% year over year to $55.0 million in the quarter.

Autodesk posted significant upside across all its geographical regions on the back of continued adoption of its products. Revenues in America jumped 17.0% year over year to $226.0 million.

International businesses continued to be strong during the quarter. EMEA revenues climbed 10.0% year over year to $234.0 million. Revenue from Asia-Pacific region jumped 9.0% year over year to $133.0 million.

Revenue from emerging economies (16.0% of the total revenue) was up 12.0% year over year to $95.0 million.

Operational Performance

Gross profit (including stock-based compensation but excluding one-time charges) was $545.2 million, up 11.9% year over year. However, gross margin decreased 30 basis points (bps) year over year to 92.0%.

Operating expenses (including stock-based compensation but excluding one-time charges) increased 8.8% year over year to $434.8 million, primarily attributable to higher marketing & sales expenses (up 2.9% year over year) and research & development expenses (up 17.8% year over year). General and administrative expenses also increased 12.9% from the year-ago quarter. However, operating expenses, as a percentage of revenue, contracted 230 bps to 73.4% in the quarter.

Operating income (including stock-based compensation but excluding one-time charges) of $110.4 million was up 25.9% year over year. Operating margin came in at 18.6% in the quarter, up 200 bps year over year, attributable to strong revenue growth and cost controls in the quarter.

Balance Sheet and Cash Flow

Autodesk’s balance sheet remains strong with no debt. The company exited the fourth quarter of 2012 with total cash and cash equivalents of $1.16 billion compared with $1.34 billion in the previous quarter. Cash flow from operating activities was $175.0 million compared with $138.0 million in the prior quarter.

Outlook

For first quarter 2013, Autodesk expects revenues in the range of $575.0 million to $590.0 million. The Zacks Consensus Estimate is pegged at $586.0 million.

GAAP EPS is expected in the range of 29 cents to 31 cents. Non-GAAP EPS is expected in the 46 cents to 48 cents range. The Zacks Consensus Estimate is currently pegged at 38 cents per share, which is evidently below the guided range.

For fiscal 2013, Autodesk expects revenues to be 10% higher than the prior year. Autodesk expects non-GAAP operating margin to improve 130 bps annually in fiscal 2013. Moreover, management expects the tax rate for the first quarter of 2013 as well as fiscal 2013 to be 26.5%.

Recommendation

In our view, Autodesk’s expanding product portfolio and broadening industry and geographic reach will help it sustain its longer-term growth strategy of providing high-volume, lower-cost CAD software. We believe that this will likely drive earnings going forward.

Moreover, the acquisitions that are being made in the field of CAD and gaming middleware sections will provide the company with long-term opportunities, particularly in the web-based communities that will likely boost the company’s cloud offerings going forward.

However, foreign exchange fluctuations, increasing exposure to Europe and competition from Adobe Systems Inc. (ADBE) and Parametric Technology Corp. (PMTC) are the primary headwinds. Additionally, challenges in the form of customer concentration keep us on the sidelines for the time being.

We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #4 Rank, which translates into a short-term (1-3 months) ‘Sell’ rating due to the earnings miss.

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