Autodesk Falls After-Hours, As Soft Guidance Offsets Earnings Beat

Shares in Autodesk (ADSK) dropped 2.6% in Tuesday’s after-hours trading as the design and software specialist posted a solid earnings beat- but issued disappointing guidance for the third quarter.

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Specifically, Q2 Non-GAAP EPS of $0.98 beat Street expectations by $0.08 while GAAP EPS of 0.44 also scraped past Street estimates by $0.01. Meanwhile revenue surged 14.6% year-over-year and beat consensus forecasts by $11.34M, while non-GAAP operating margin came in at 29% vs consensus of 27.3%.

Looking ahead to Q3, Autodesk is now guiding for $930-945M in revenue and $0.91-0.97 EPS- which fell towards the low-range of Street expectations heading into the price of $940.3M revenue and $0.95 EPS.

At the same time, the high end of the FY2021 billings guidance was lowered by ~ $70M, partially attributable to fewer multi-year contracts- although both FY2021 revenue and EPS guidance midpoints were above consensus. For FY2021, the FCF guidance is unchanged at $1,300–1,400M, compared to the $1,344M consensus.

“We delivered a strong second quarter as a result of our resilient business model and strategic nature of our products,” said Andrew Anagnost, Autodesk CEO. “Our cloud-based solutions are helping our customers stay productive in the current environment, and have resulted in expanded relationships and usage of our products.”

Indeed, for Oppenheimer analyst Koji Ikeda, earning highlights included: 1) Subscription Plan revenue growth of 27% y/y; 2) expanding operating margins; and 3) good free cash flow generation.

He reiterated his buy rating on the stock on August 26 with a $300 price target. “In our assessment, the businesses executed well in F2Q that will likely be the trough demand quarter for Autodesk’s end-markets during the pandemic” Ikeda commented.

While guidance could be viewed as uninspiring, he noted that the midpoint was raised, and the overall range narrowed, suggesting visibility has improved, a positive.

Net-net “We believe the F2Q results lend support to our upgrade thesis that digitization cycles in Autodesk’s end-markets are accelerating, that should help drive the business towards its FY2023 financial targets (~$2.4B in FCF, etc.).” (See ADSK stock analysis on TipRanks).

Turning to the rest of the Street, Autodesk shows a cautiously optimistic Moderate Buy analyst consensus, with 12 recent buy ratings, 2 hold ratings and 2 sell ratings. The average analyst price target stands at $243, indicating 4% downside potential from current levels, with shares already up 38% year-to-date.