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Investors Taking a Shine to Autodesk

Shares soar after the company outperforms on the quarter and raises guidance.

Updated from Nov. 20

Shares of


(ADSK) - Get Free Report

were soaring Friday, as investors cheered third-quarter results that handily beat analyst estimates and its projections and guided above expectations.

Shares of Autodesk soared $3.12, or 16.1% to $22.52 in recent trading.

The San Rafael, Calif.-based maker of design and special-effects software reported earnings on a generally accepted accounting principles basis of $22.6 million, or 20 cents a share, in the third quarter, which ended Oct. 31. Analysts polled by Thomson First Call were expecting Autodesk earnings to come in at 14 cents a share and the company's guidance had been for a range of 13 cents to 16 cents a share.

A year earlier, Autodesk posted a GAAP net loss of $3.9 million, or 3 cents a share, and pro forma net income of $5.8 million, or 5 cents a share, excluding charges. The company did not make any adjustments to GAAP results in the just-reported third quarter.

Revenue jumped 24% from a year earlier, to $233.9 million. Analyst estimates pegged revenue at $218.8 million for the quarter and the company's guidance ranged from $216 million to $221 million.

"Each of our lines of business turned in a strong performance," Autodesk CEO Carol Bartz said in a statement Thursday. In particular, revenue from upgrades to Autodesk's AutoCAD computer-aided design products soared 50% to $44 million. Autodesk also registered 48,600 new seats of AutoCAD products, representing a 46% sequential increase.

U.S. Bancorp Piper Jaffrey analyst Gene Munster called the third-quarter results "excellent," but not a complete surprise. In a signal of strong sales, some Autodesk resellers previously reported the company did not allow them to process some orders at the end of the third quarter, but required them to wait until the current quarter, he said. That was the first time he had heard of that happening since he began covering the company in 1996.

In addition to those holdover sales, Autodesk's fourth-quarter results also will receive a boost because it is retiring technical support on several products, including AutoCAD 2000, on Jan. 15. Such so-called "obits," or product retirements, typically prompt customers to upgrade or buy new software.

"It's probably too early to say this, but based on historic trends, this January is going to be a layup for them," said Munster, who has an outperform on Autodesk. His firm hasn't done any banking with Autodesk in the past five years.

For its fiscal fourth quarter, ending in January, Autodesk expects revenue to range from $245 million and $255 million and earnings to range from 27 cents to 32 cents a share. That's better than analyst estimates, which forecast revenue at $236.5 million and earnings at 23 cents a share.

Autodesk also offered guidance for its fiscal first quarter, saying revenue is expected to range from $215 million to $225 million and earnings should range from 8 cents to 13 cents a shares.

For full fiscal year 2005, the company expects revenue to fall between $940 million to $975 million and earnings to range from 90 cents to $1.10 a share. That's also better than the average estimate among analysts, which calls for revenue at $934.6 million and earnings at 81 cents a share.

The guidance for 2005 positions Autodesk to achieve its target 18% to 20% operating margin for subsequent annual periods, the company said. Autodesk's operating margin reached 12% in the third quarter, up five percentage points sequentially.