Cognos Beats Street, Then Guides Down - TheStreet

Cognos Beats Street, Then Guides Down

The intelligence software maker posts better-than-expected third-quarter results but warns about the fourth quarter.
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Updated from 4:53 p.m. EST



posted a 25% increase in third-quarter revenue, but said fourth-quarter results could fall shy of analyst expectations.

The Ottawa, Canada-based business intelligence-software maker posted net income of $24.2 million, or 26 cents a share, in the quarter ended Nov. 30, according to generally accepted accounting principles. That compares with net income of $19.9 million, or 22 cents a share, in the same period a year earlier. Analysts were expecting pro forma earnings of 25 cents a share, according to Thomson First Call.

The company's third-quarter revenue jumped to $172.2 million from $138.1 million a year earlier, and rose 9% from $158.2 million in the previous quarter. The consensus estimate had called for revenue of $171.1 million in the third quarter.

The strong results were driven by Cognos' recently launched ReportNet reporting product, which accounted for $16 million in sales in the quarter. In a postclose call, executives said ReportNet "surpassed all expectations."

Looking ahead, Cognos expects fourth-quarter revenue to range from $191 million to $194 million, and earnings to range from 32 cents to 35 cents a share. That suggests results may come in short of analyst estimates, which set earnings at 35 cents a share on revenue of $194 million.

"Clearly we're seeing some leading indicators of an improving economy," said President and Chief Operating Officer Rob Ashe. But "the buying cycles are still very tough." He said things will remain tight for the foreseeable future.

Despite that outlook, Cognos reported signing 10 contracts greater than $1 million in the third quarter, an all-time high for the company.

But investors seemed to be focusing more on the cautious outlook. Shares of Cognos declined 75 cents, or 2.3%, to $31.46 Wednesday, and were recently trading below $31 in after-hours activity.

Deutsche Bank analyst Brian Skiba said the guidance wasn't materially different from his estimates and that he was puzzled by the initial selloff of Cognos shares. "It seemed like a pretty decent quarter," said Skiba, who has a hold rating on Cognos. "I don't think there's anything that's going to wrinkle anyone's feathers tomorrow." (His firm hasn't done any banking with Cognos.)

For the full fiscal-year 2004, Cognos said revenue should range from $672 million to $675 million and earnings should range from 92 cents to 95 cents a share. That straddles the analyst estimates, which pegged revenue at $673.3 million and earnings at 94 cents a share.