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Guidewire (GWRE) Stock Surges 36% YTD: Will the Rally Last?
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Guidewire Software (GWRE - Free Report) shares have been performing well on the trading front with a gain of 36.1% year to date (YTD) compared with the S&P 500 composite and sub-industry’s growth of 17.6% and 10.3%, respectively.
The stock is still down 3.5% from its 52-week high of $153.85.
Improving financial performance is buoying the good run on the trading front. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 109.2%
Guidewire is a provider of software solutions for P&C insurers. Its cloud platform boasts a trusted infrastructure with modular and interconnected cloud services to aid insurers in upgrading their core operations. The platform also has scalability as well as the ability to embed analytics and core workflows. The company updates its cloud platform thrice a year to keep the system agile and nimble amid a constantly evolving P&C industry.
Image Source: Zacks Investment Research
Key Catalysts
The focus on cloud strategy has been paying off for Guidewire, as evidenced by increasing sales. GWRE is witnessing solid Tier-1 deal volume and increasing migration activity, especially in Asia Pacific. In the last reported quarter, it won eight deal wins. Management highlighted that InsuranceSuite cloud wins now stand at 24 for the year-to-date period, representing a 33% increase from the same period in the last fiscal year.
Guidewire’s InsuranceSuite Cloud comprises three primary applications, namely PolicyCenter Cloud, BillingCenter Cloud and ClaimCenter Cloud.
Management noted it is witnessing increasing market engagement globally. This, along with the maturity of the platform will boost the size of the pipeline and quality of engagement.
In the last reported quarter, the company’s total revenues were $240.7 million, up 16% year over year. The revenues surpassed the Zacks Consensus Estimate by 4%.
Subscription and support segment’s revenues (57.3% of total revenues) soared 28% from the year-ago quarter to $138 million in the fiscal third quarter. The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to boost sales of subscription-based solutions. As of Apr 30, annual recurring revenues (ARR) were $828 million, up 14.7% year over year.
Management also remains focused on driving cloud operations efficiently to boost cloud margins. Subscription and support segment’s gross margin increased to 65.5% from 55.1% on a year-over-year basis, attributed to increased cloud infrastructure efficiency.
The company keeps fostering and expanding its network of partners, which includes SIs and solution providers, to drive sustained activity and greater value from the platform.
Solid Guidance
Management raised its guidance for fiscal 2024 owing to strong pipeline activity. GWRE expects total revenues between $968 million and $976 million compared with the previous guided range of $957-$967 million. ARR is now expected to be in the band of $856-$864 million (previously projected range: $852-$862 million). Non-GAAP operating income is estimated between $94 million and $102 million.
Cash flow from operations is now anticipated in the range of $130-$150 million compared with the previous guidance of $120-$140 million.
Estimates Moving North
The Zacks Consensus Estimate for fiscal 2024 and 2025 revenues is pegged at $972.1 million and $1.09 billion, respectively, indicating growth of 7.4% and 11.8% from the year-ago levels.
The estimated figures for fiscal 2024 and 2025 EPS, $1.24 and $1.91, indicate an increase of 254.3% and 54%, respectively, from the prior-year actuals.
The consensus mark for fiscal 2024 and 2025 EPS has increased 10.7% and 9.8%, respectively, in the past 90 days, reflecting analysts’ optimism.
Headwinds Persists
Service revenues are getting affected as the company invests more in its ecosystem of implementation partners.
Rising research and development costs and integration risks are major concerns for this Zacks Rank #3 (Hold) stock. In the last reported quarter, total operating expenses increased 1.4% year over year to $158.9 million.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 4.4% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 24.5% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.72, up 3.7% in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing once, with the average surprise being 4.8%. Its shares have risen 10.2% in the past year.
The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26. MANH’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 26.6%. The stock has surged 38.8% in the past year.
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Guidewire (GWRE) Stock Surges 36% YTD: Will the Rally Last?
Guidewire Software (GWRE - Free Report) shares have been performing well on the trading front with a gain of 36.1% year to date (YTD) compared with the S&P 500 composite and sub-industry’s growth of 17.6% and 10.3%, respectively.
The stock is still down 3.5% from its 52-week high of $153.85.
Improving financial performance is buoying the good run on the trading front. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 109.2%
Guidewire is a provider of software solutions for P&C insurers. Its cloud platform boasts a trusted infrastructure with modular and interconnected cloud services to aid insurers in upgrading their core operations. The platform also has scalability as well as the ability to embed analytics and core workflows. The company updates its cloud platform thrice a year to keep the system agile and nimble amid a constantly evolving P&C industry.
Image Source: Zacks Investment Research
Key Catalysts
The focus on cloud strategy has been paying off for Guidewire, as evidenced by increasing sales. GWRE is witnessing solid Tier-1 deal volume and increasing migration activity, especially in Asia Pacific. In the last reported quarter, it won eight deal wins. Management highlighted that InsuranceSuite cloud wins now stand at 24 for the year-to-date period, representing a 33% increase from the same period in the last fiscal year.
Guidewire’s InsuranceSuite Cloud comprises three primary applications, namely PolicyCenter Cloud, BillingCenter Cloud and ClaimCenter Cloud.
Management noted it is witnessing increasing market engagement globally. This, along with the maturity of the platform will boost the size of the pipeline and quality of engagement.
In the last reported quarter, the company’s total revenues were $240.7 million, up 16% year over year. The revenues surpassed the Zacks Consensus Estimate by 4%.
Subscription and support segment’s revenues (57.3% of total revenues) soared 28% from the year-ago quarter to $138 million in the fiscal third quarter. The company’s focus on enhancing the Guidewire Cloud platform with new capabilities is expected to boost sales of subscription-based solutions. As of Apr 30, annual recurring revenues (ARR) were $828 million, up 14.7% year over year.
Management also remains focused on driving cloud operations efficiently to boost cloud margins. Subscription and support segment’s gross margin increased to 65.5% from 55.1% on a year-over-year basis, attributed to increased cloud infrastructure efficiency.
The company keeps fostering and expanding its network of partners, which includes SIs and solution providers, to drive sustained activity and greater value from the platform.
Solid Guidance
Management raised its guidance for fiscal 2024 owing to strong pipeline activity. GWRE expects total revenues between $968 million and $976 million compared with the previous guided range of $957-$967 million. ARR is now expected to be in the band of $856-$864 million (previously projected range: $852-$862 million). Non-GAAP operating income is estimated between $94 million and $102 million.
Cash flow from operations is now anticipated in the range of $130-$150 million compared with the previous guidance of $120-$140 million.
Estimates Moving North
The Zacks Consensus Estimate for fiscal 2024 and 2025 revenues is pegged at $972.1 million and $1.09 billion, respectively, indicating growth of 7.4% and 11.8% from the year-ago levels.
The estimated figures for fiscal 2024 and 2025 EPS, $1.24 and $1.91, indicate an increase of 254.3% and 54%, respectively, from the prior-year actuals.
The consensus mark for fiscal 2024 and 2025 EPS has increased 10.7% and 9.8%, respectively, in the past 90 days, reflecting analysts’ optimism.
Headwinds Persists
Service revenues are getting affected as the company invests more in its ecosystem of implementation partners.
Rising research and development costs and integration risks are major concerns for this Zacks Rank #3 (Hold) stock. In the last reported quarter, total operating expenses increased 1.4% year over year to $158.9 million.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Manhattan Associates (MANH - Free Report) and ANSYS (ANSS - Free Report) . Badger Meter and Manhattan Associates sport a Zacks Rank #1 (Strong Buy) each, while ANSYS carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 4.4% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 24.5% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.72, up 3.7% in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing once, with the average surprise being 4.8%. Its shares have risen 10.2% in the past year.
The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26. MANH’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 26.6%. The stock has surged 38.8% in the past year.