Tyler’s 2020 Profit Outlook Tops Estimates; Street Sees 8% Downside

Tyler Technologies reported robust 3Q results and provided upbeat profit guidance for 2020. The software company’s 3Q earnings of $1.50 per share increased 11.1% from the year-ago quarter and came ahead of consensus estimates of $1.33. Revenues of $285.7 million grew 3.8% year-over-year and topped Street estimates of about $284 million.

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Tyler’s (TYL) CEO Lynn Moore said that the company’s revenues turned positive in 3Q driven by “strong recurring revenues with subscription revenues up 18.6%.” Moore added that 3Q bookings increased 12.9% year-over-year “and were particularly strong for our justice and public safety solutions.” Further, the company ended the quarter with a “record high” backlog of $1.55 billion, which increased 9.2% year-over-year.

As for 2020, Tyler expects to earn $5.48-$5.58 per share, which is above the Street consensus of $5.42. Sales are forecast to generate $1.118-1.13 million in 2020, compared with analysts’ estimates of $1.13 million. (See TYL stock analysis on TipRanks)

Ahead of the 3Q results, RBC Capital analyst Alex Zukin raised the price target on Tyler stock to $405 (0.24% downside potential) from $375 and maintained a Buy rating. The analyst believes that the company is a “steady compounder.” Zukin added that he remains optimistic on the company’s long-term outlook, despite the instability in the end market.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 2 Buys and 1 Hold. Given the year-to-date share rally of 35.3%, the average price target of $375 now implies downside potential of about 7.6% to current levels.