Please ensure Javascript is enabled for purposes of website accessibility

Why Manhattan Associates Inc. Stock Took a Hit Wednesday

By Daniel Sparks - Feb 7, 2018 at 12:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The software company's cloud subscription revenue more than doubled. So, what was the problem?

What happened

Shares of supply chain, omnichannel, and inventory software company Manhattan Associates (MANH 2.29%) fell as much as 15.6% on Wednesday morning after the company reported its fourth-quarter and full-year 2017 results. The stock is down about 15% at the time of this writing.

Investors may be disappointed by the company's worse-than-expected revenue, and its weak outlook for 2018. It's in the midst of a transformation intended to shift its business to cloud-first solutions, which led to weakness in legacy client solutions -- namely software licensing and services.

A chalkboard sketch of a stock price falling

Image source: Getty Images.

So what

Manhattan reported revenue of $144.1 million, down from $147.6 million in the year-ago quarter. Year-over-year decreases in licensing and services revenue were the primary reasons for that drop. On average, analysts were expecting revenue of about $144.6 million. 

Non-GAAP adjusted earnings for the quarter were $0.45 per share, down from $0.46 per share in the year-ago quarter. This was in line with analysts' consensus estimate for the key metric. 

Despite Manhattan's lower revenue and EPS, CEO Eddie Capel said its Q4 and full year "marked a pivotal beginning" to the company's cloud transformation. To his credit, cloud subscription revenue in Q4 more than doubled from the year-ago quarter, from $1.4 million to $3.2 million.

Now what

Looking ahead, Manhattan's guidance suggests it will have more headwinds to overcome before its cloud-first transformation gains enough steam to return consolidated results to growth.

The company said it expected 2018 revenue of between $546 million and $558 million, which would amount to an 6% to 8% decline in revenue. Non-GAAP EPS is forecast to land between $1.48 and $1.52, down 19% to 21%.

Of course, investors will want to watch Manhattan's cloud subscriptions closely in 2018 to see if the sharp growth rate persists. Fortunately, Capel said the company expects "ongoing growth of our Manhattan Active cloud offerings as customers seek a cloud-first approach."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Manhattan Associates, Inc. Stock Quote
Manhattan Associates, Inc.
$117.23 (2.29%) $2.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.