The Gory Details of Open Text's Earnings Miss

Seth Jayson, The Motley Fool
Updated

Open Text (NAS: OTEX) reported earnings on May 1. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q3), Open Text missed estimates on revenues and whiffed on earnings per share.

Compared to the prior-year quarter, revenue increased and GAAP earnings per share shrank.


Margins shrank across the board.

Revenue details
Open Text tallied revenue of $292.3 million. The 17 analysts polled by S&P Capital IQ hoped for sales of $303.1 million on the same basis. GAAP reported sales were 11% higher than the prior-year quarter's $263.0 million.

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Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $1.01. The 17 earnings estimates compiled by S&P Capital IQ predicted $1.16 per share. GAAP EPS of $0.59 for Q3 were 3.3% lower than the prior-year quarter's $0.61 per share.

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Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 70.9%, 240 basis points worse than the prior-year quarter. Operating margin was 10.9%, 170 basis points worse than the prior-year quarter. Net margin was 11.9%, 170 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $319.9 million. On the bottom line, the average EPS estimate is $1.29.

Next year's average estimate for revenue is $1.23 billion. The average EPS estimate is $4.84.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 181 members out of 202 rating the stock outperform, and 21 members rating it underperform. Among 66 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 60 give Open Text a green thumbs-up, and six give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Open Text is outperform, with an average price target of $72.18.

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At the time thisarticle was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Fool owns shares of and has written calls on Open Text. Motley Fool newsletter services have recommended buying shares of Open Text. Motley Fool newsletter services have recommended writing covered calls on Open Text. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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