Autodesk (ADSK) Sinks 15% on European Woes

Autodesk (ADSK: Charts, News) investors were severely punished on Friday, after the company reported second quarter earnings that broadly missed on both the top and bottom lines. Shares plummeted over 15% on above average volume. The company, best known for its AutoCAD design software, earned 28 cents per share, or $64.6 million, on revenue of $568.7 million.

This was a 6.7% decline in profit and 4% increase in revenue from the prior year quarter. Analysts had been expecting Autodesk to earn 49 cents per share on $593.4 million. Autodesk's revenue also missed its own prior guidance of $580 million to $600 million. The company's revenue was propped up by a 2.3% increase in license revenues and 7% growth in maintenance revenues. Excluding some one-time charges, which were not excluded from analysts' estimates, Autodesk still fell short of estimates at 48 cents per share. Daily Chart
The company blamed execution challenges and slowdown in Europe for its poor performance. This is the first time in two years that Autodesk has fallen short of analyst expectations. Autodesk had previously warned that it would come up short of estimates in May, when the ongoing European crisis started to dent sales in its biggest market. The company's weak earnings were exacerbated by weak guidance. For the third quarter, the company expects to earn between 40 to 50 cents per share on revenue between $550 million and $570 million. Wall Street was expecting Autodesk to earn at least 50 cents per share on revenue of $601.2 million. Autodesk attempted to assuage nervous investors by announcing unspecified job cuts that would eventually reduce its labor costs. The company has set aside approximately $50 million to $60 million in pre-tax charges to restructure the business around the proposed job cuts. ThinkEquity analyst Daniel Cummins noted that in addition to the "spill-over effects from Europe," "emerging markets were weak and United States also decelerated." Costs increased across the board. Operating expenses also edged up 5.7%, primarily due to increased sales and marketing costs. General and administrative expenses rose 11.2%. Revenue in the United States rose 4% year-on-year, Asia Pacific posted a gain of 12%, but revenue from Europe, the Middle East and Africa slid 1%. Revenue from emerging markets, which comprises 15% of Autodesk's revenue, stayed flat. In the long term, Autodesk still has positive growth catalysts, mainly in its cloud and mobile computing products. Autodesk is producing iOS and Android software for smartphones and tablets as traditional desktops and laptops fall out of favor. These software services, coupled with a slimmed down, restructured workforce, should help the company increase revenue and margins. Gross margins remain the company's best features - rising 20 basis points to 91.2% from the previous year. However, the company's cash dropped from $1.07 billion in the prior year quarter down to $930.2 million. Operating cash flow also decreased from $139.3 million to $107 million. Shares of Autodesk now trade at 12.7 times forward earnings with a 5-year PEG ratio of 1.1. The stock has fallen to $30, which is still above its 52-week low of $24.63. The stock hit a 52-week high of $42.69 in April, and is still up 14% over the past twelve months. Autodesk does not currently pay a dividend. Other News About ADSK Autodesk Outlook Bleak, to Cut Jobs; Shares Sink Autodesk disappoints investors with a rare miss. Autodesk's Outlook Disappoints Autodesk sees a bleak year ahead. Other Stocks in the News Apple, Samsung Both Lose in South Korea Patent Case The battle between Apple and Samsung takes an unexpected turn. Aruba Networks Swings to Q4 Loss Aruba shares rally despite a quarterly loss. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Aug 27, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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