Open Text Corporation (OTEX) had a busy Wednesday last week as it made two big announcements: a solid fiscal second-quarter performance and the acquisition of a business process solutions provider.
Such activity is what we might expect out of a company with a lot of growth potential, but what has been really nice to see is the improvement in earnings estimates over the past 7 days. This supports OTEX’s Zacks #1 Rank (‘strong buy’) an could be foreshadowing more improvement moving forward.
Open Text Corp. is the world’s largest independent provider of Enterprise Content Management (ECM) software. Its solutions manage information for all types of business, compliance and industry requirements in large companies, government agencies and professional service firms.
Fiscal Second Quarter
Open Text said that license sales rebounded in the fiscal second quarter, helping revenue to advance by 7.9% to $267.5 million. That compares with $247.8 million last year. Meanwhile, license revenue was up 8.9% to $79.2 million.
Earnings per share of $1.17 easily improved upon last year’s 85 cents, while also topping the Zacks Consensus Estimate by more than 13%.
As the chart below shows, OTEX had some troubles in 2009 with 3 straight quarters that underperformed the Zacks Consensus Estimate. But this fiscal year has so far proved to be a solid improvement:
Welcome Aboard Metastorm
At the same time of its quarterly report, Open Text also announced that it was acquiring Metastorm Inc., provider of Business Process Management (BPM), Business Process Analysis (BPA) and Enterprise Architecture (EA). According to OTEX, this acquisition enhances its ECM solutions portfolio.
Metastorm stockholders get $182 million in cash out of the deal, which is expected to close in OTEX’s fiscal third quarter, ending March 2011.
Earnings Estimates on the Rise
The reaction to all of this has sent earnings estimates higher in the past week. The Zacks Consensus Estimate for this fiscal year, ending June 2011, is $4.06 per share. This guidance has advanced 4.6% in 7 days from $3.88. This comes on 1 upward revision for OTEX, though there are only 4 total estimates.
As for the fiscal year ending June 2012, the Zacks Consensus Estimate of $4.43 is up 6.5% in 7 days from $4.16. Again, this breaks down to 1 upward revision out of 4 total estimates. Aggressive growth investors would be interested to know that analysts currently expect profit growth of more than 9% for next fiscal year over this fiscal year.
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