Autodesk Inc. (ADSK), a leading provider of 2D and 3D designs, reported better-than-expected second quarter 2011 earnings and revenues, beating the Zacks Consensus Estimate and its own guidance. Results were boosted by increased revenues, growth in international markets, strong year-over-year growth in maintenance billings and commercial new licenses along with impressive cost controls. 

Autodesk provided an in-line third quarter guidance. Following the company’s strong second quarter results overall, analysts’ opinions turned positive on the stock.

Second Quarter Highlights

The company reported second quarter earnings per share (EPS) of 30 cents, which jumped 100.0% year over year from 15 cents and were well ahead of the company’s guidance of 19 cents to 22 cents per share. EPS also topped the Zacks Consensus Estimate of 20 cents per share by 50.0%. Earnings exclude one-time charges but include stock-based compensation expense. Earnings were boosted by higher revenues, growth in international markets and impressive cost controls.

Total revenue of $472.8 million was up 14.0% year over year from $414.9 million, due mainly to strong global end market demand. This was well ahead of both the Zacks Consensus Estimate of $457.0 million and the company’s guidance of $445.0 million to $460.0 million (raised at its Analyst Day from a previous guidance of $435.0 million to $460.0 million). The year-over-year growth was primarily driven by a continued improvement in the demand environment, favorable foreign exchange and strong international revenue growth.

Guidance

During the second quarter conference call, management provided third quarter guidance. For the third quarter, management expects revenues between $450.0 million and $475.0 million, in line with the Street expectation of $463.8 million.

Excluding 4 cents per share for the amortization of acquisition related intangibles but including 6 cents per share related to stock-based compensation expense, EPS is expected to be in the range of 22 cents to 27 cents. The effective tax rate is expected to be 27%.

For full year 2011, management did not provide any specific guidance but expects the fourth quarter 2011 to be the strongest. Given the strong first half fiscal 2011 results, management anticipates increased revenues and higher operating margins in full year 2011. The non-GAAP operating margin for 2011 is expected to increase by approximately 400 to 450 basis points (bps) in 2011, compared with the previous expectation for an increase of 300 bps.

Agreements of Analysts

For the third quarter of 2010, the earnings revision trend remains considerably positive as all analysts are in agreement. All 7 analysts covering the stock revised upward for the third quarter of 2011 over the last 7 days. For fiscal year 2011, all 9 analysts raised their EPS projections in the last week. There were no downward revisions.

The company will benefit from increased demand for 3D products, expanding market share, a diversified product pipeline, cost-cutting initiatives, margin expansion and liquidity. Moreover, ADSK continues to benefit from growth in new accounts and subscription and increasing penetration in emerging markets. Over the long term, we remain positive on the stock, given its strong revenues and operating performance.

Magnitude of Estimate Revisions

In accordance with the overall trend of estimate revisions for Autodesk, the Zacks Consensus Estimate for the third quarter 2011 increased 2 cents to 24 cents per share in the last 7 days. This is a 60% improvement over last year’s EPS of 15 cents. The Zacks Consensus Estimate for the full year has advanced 10 cents to $1.01 per share.

The estimate revision trend shows that analysts remain positive on the stock and expect the company to post upbeat third quarter 2011 results.  However, softness in the European economy, foreign exchange headwinds and intense competition could negatively impact results.

We expect the stock to post upside gains and therefore maintain our Neutral rating on Autodesk over the long term (6+ months). 

 
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