Guidewire (GWRE) to Report Q3 Earnings: What's in the Cards?

Guidewire Software, Inc. GWRE is scheduled to report third-quarter fiscal 2020 results on Jun 3.

For the fiscal third quarter, Guidewire expects revenues of $153-$157 million. The Zacks Consensus Estimate for revenues is pegged at $152.5 million, indicating a decline of 6.4% from the year-ago quarter.

The Zacks Consensus Estimate for earnings is pegged at a loss of 6 cents per share, unchanged over the past 30 days. Notably, the company had reported earnings of 18 cents in the prior-year quarter.

Notably, the company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 132.97%.

Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. Price and EPS Surprise

Guidewire Software, Inc. price-eps-surprise | Guidewire Software, Inc. Quote

Factors to Note

Robust adoption of cloud-based Guidewire InsurancePlatform products among insurers might have driven the fiscal third-quarter performance. Growing clout of subscription-based InsuranceSuite Cloud offerings, in particular, are expected to have driven License and subscription revenues in the to-be-reported quarter.

Markedly, prominent insurers — including the likes of Brazil-based insurer, SancorSeguros do Brazil S.A., — selected the company’s InsurancePlatform suite of solutions in the quarter to be reported to enhance infrastructure and business processes. The new deal wins might get reflected in the fiscal third-quarter revenues.

Growing clout of InsuranceNow following the roll out of latest InsuranceNow GO offering that accelerates implementation of the solution in a cost-effective manner is expected to have driven the fiscal third-quarter performance. During the quarter under review, Guidewire InsuranceNow was adopted by Vermont Mutual Insurance Group to improve business agility and speed-to-market.

Notably, Guidewire expects License and subscription revenues to be in the range of $78-$82 million. The Zacks Consensus Estimate is pegged at $78 million, compared with $105 million reported in the fiscal second quarter.

Further, Guidewire’s fiscal third-quarter results are expected to reflect gains from an expanding partner base in the PartnerConnect program. Notably, with the PartnerConnect program, insurers can easily access Guidewire’s Marketplace, which helps them introduce innovative solutions and adapt to changing market demands. During the quarter to be reported, Donan joined PartnerConnect program as a Solution partner to develop an add-on that will aid ClaimCenter users in streamlining claims investigative services.

Further, coronavirus crisis-triggered demand for cloud-based insurance software solutions is likely to get reflected in the to-be-reported quarter’s revenues. However, coronavirus crisis led macroeconomic weakness might have impacted renewals from small-and-medium sized insurers.

Additionally, the company has been increasing investments to enhance insurance software products via collaborations with leading on-demand cloud infrastructure vendors, including Amazon Web Services and Microsoft Azure.

The company has been focused on enhancing Guidewire Cloud platform with new capabilities including digital frameworks, automation, tooling, and other cloud services and leverage Guidewire data platform. The latest functionalities are anticipated to have driven adoption of the company’s InsurancePlatform suite of solutions in the fiscal third quarter. Recently, Guidewire’s Core, Data, and Digital products were selected by NFU Mutual to facilitate the latter’s digital transformation process.

Notably, Maintenance revenues are anticipated in the range of $20-$20.5 million. The Zacks Consensus Estimate is pegged at $20.3 million, compared with $21.1 million in the prior quarter. Management anticipates maintenance revenues to be muted as customers opt for cloud-based subscription services over term licenses.

Meanwhile, Services revenues are projected between $53 million and $57 million. The Zacks Consensus Estimate is pegged at $54 million, compared with $47.4 million in the fiscal second quarter.

However, increasing expenditure on product enhancements and marketing initiatives may have impeded margin expansion in the fiscal third quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Guidewire this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

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

Stocks to Consider

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

Campbell Soup Company CPB has an Earnings ESP of +1.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Guess?, Inc. GES has an Earnings ESP of +12.75% and a Zacks Rank of 2. 

The J. M. Smucker Company SJM has an Earnings ESP of +4.33% and a Zacks Rank #2.

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