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Ultimate Software (ULTI) Down to Strong Sell on Tepid View
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On Jun 20, The Ultimate Software Group Inc was downgraded to Zacks Rank #5 (Strong Sell).
The downgrade can be attributed to declining earnings estimates in the last 60 days primarily due to tepid guidance for the current quarter. The Zacks Consensus Estimates for 2017 and 2018 decreased 6.5% and 5.1% to $13.73 and $14.94, respectively.
The company’s first-quarter results were mixed. While adjusted earnings of 27 cents per share beat the Zacks Consensus Estimate by 16 cents, revenues of $228.5 million missed the same.
Notably, Ultimate Software has beaten the Zacks Consensus Estimate in two of the four trailing quarters with an average positive surprise of 20.11%.
The Ultimate Software Group, Inc. Price and EPS Surprise
Ultimate Software has underperformed the Zacks categorized Computer Software-Services industry since it reported the first-quarter results on Apr 25. While the stock returned 2.7%, the industry gained 7%.
The underperformance can be attributed to tepid second-quarter guidance. For second-quarter 2017, management expects recurring revenues to be approximately $196 million and total revenues to be approximately $228 million. Operating margin is anticipated to be approximately 20%.
Management now expects most of the growth to come in second-half 2017. For 2017, recurring revenues are projected to grow by more than 25%. Total revenue is projected to grow by approximately 24% and operating margin to be approximately 21%.
The company’s contracting operating margin remains a concern primarily due to continuing investments on new headcounts. Moreover, declining retention rate primarily due to a client mix-shift to small & medium business (SMB) and mid-market remains a concern.
The long-term earnings growth rate for Verint, DST and Intuit are pegged at 8.5%, 10% and 14.2%, respectively.
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Ultimate Software (ULTI) Down to Strong Sell on Tepid View
On Jun 20, The Ultimate Software Group Inc was downgraded to Zacks Rank #5 (Strong Sell).
The downgrade can be attributed to declining earnings estimates in the last 60 days primarily due to tepid guidance for the current quarter. The Zacks Consensus Estimates for 2017 and 2018 decreased 6.5% and 5.1% to $13.73 and $14.94, respectively.
The company’s first-quarter results were mixed. While adjusted earnings of 27 cents per share beat the Zacks Consensus Estimate by 16 cents, revenues of $228.5 million missed the same.
Notably, Ultimate Software has beaten the Zacks Consensus Estimate in two of the four trailing quarters with an average positive surprise of 20.11%.
The Ultimate Software Group, Inc. Price and EPS Surprise
The Ultimate Software Group, Inc. Price and EPS Surprise | The Ultimate Software Group, Inc. Quote
Tepid Q2 Guidance Hurt Shares
Ultimate Software has underperformed the Zacks categorized Computer Software-Services industry since it reported the first-quarter results on Apr 25. While the stock returned 2.7%, the industry gained 7%.
The underperformance can be attributed to tepid second-quarter guidance. For second-quarter 2017, management expects recurring revenues to be approximately $196 million and total revenues to be approximately $228 million. Operating margin is anticipated to be approximately 20%.
Management now expects most of the growth to come in second-half 2017. For 2017, recurring revenues are projected to grow by more than 25%. Total revenue is projected to grow by approximately 24% and operating margin to be approximately 21%.
The company’s contracting operating margin remains a concern primarily due to continuing investments on new headcounts. Moreover, declining retention rate primarily due to a client mix-shift to small & medium business (SMB) and mid-market remains a concern.
Key Picks
Verint Systems (VRNT - Free Report) , DST Systems , and Intuit (INTU - Free Report) sporting a Zacks Rank #1 (Strong Buy) are better-ranked stocks in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Verint, DST and Intuit are pegged at 8.5%, 10% and 14.2%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>