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PTC Q1 Earnings Likely to Benefit from CAD & IoT Bookings

PTC Inc. PTC is set to report first-quarter fiscal 2019 results on Jan 23.

In the last reported quarter, the company’s adjusted earnings of 45 cents per share beat the Zacks Consensus Estimate by a penny. Notably, PTC has beaten the Zacks Consensus Estimate in all of the trailing four quarters, with positive average earnings surprise of almost 7%.

Moreover, non-GAAP revenues of $322 million were in line with the Zacks Consensus Estimate. The figure increased almost 5% from the year-ago quarter.

PTC anticipates first-quarter fiscal 2019 revenues between $270 million and $285 million, and adjusted earnings (per ASC 605) between 37 cents and 42 cents per share.

The Zacks Consensus Estimate for first-quarter revenues is $324.7 million, which reflects year-over-year growth of 5.9%. Moreover, the consensus mark for earnings has been steady at 41 cents over the past seven days.

PTC Inc. Price and EPS Surprise

PTC Inc. Price and EPS Surprise | PTC Inc. Quote


Let’s see how things are shaping up prior to this announcement.

Solid Bookings & Recurring Revenues: Key Catalysts  

PTC’s top line is expected to benefit from strong CAD and industrial IoT bookings. Notably, IoT represented 25% of the company’s bookings in 2018. In fact, management expects IoT to become its second-largest source of bookings in fiscal 2019.

The company is benefiting from its partnership with Rockwell Automation. During the quarter, PTC and Rockwell Automation launched FactoryTalk InnovationSuite. The solution is supported PTC’s ThingWorx Industrial IoT Platform, which includes industrial connectivity from Kepware, and the Vuforia augmented reality (AR) solution.

The company also launched KEPServerEX Version 6.6 industrial connectivity platform that extend Kepware’s market-leading position in computer numeric control (CNC) and injection molding machine (IMM) connectivity. The latest solution helps manufacturers accelerate their digital transformation initiatives.

PTC also acquired Frustum for approximately $70 million in the quarter. Frustum uses artificial intelligence (AI) to generate design options. Its technology makes the design process quicker and innovative. The acquisition strengthens PTC’s Creo portfolio offerings.  

Moreover, increasing recurring software revenue base (90% in the last reported quarter) is a positive. The transition to subscription business model from a perpetual license model is further expected to drive recurring revenue growth.

Notably, PTC’s ThingWorx continues to gain rapid adoption. Additionally, the partnership with Microsoft MSFT that combines ThingWorx and Azure IoT is helping PTC win new contracts in the smart connected product (SCP) market.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

PTC has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks to Consider

Here are couple of stocks you may consider as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Twitter TWTR has an Earnings ESP of +26.55% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Grubhub GRUB has an Earnings ESP of +21.07% and a Zacks Rank #3.

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