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Why Autodesk, Inc. Shares Jumped 10% Higher Today

By Anders Bylund – Nov 21, 2018 at 6:18PM

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The engineering software expert beat the Street in the third quarter and is spending $875 million on a strategic buyout.

What happened

Shares of Autodesk (ADSK 2.43%) closed 9.7% higher on Wednesday, following the release of solid third-quarter results. The maker of software used in engineering, 3D design, and media productions also announced an $875 million acquisition alongside the earnings release. Earlier in the day, the stock rose as much as 13.3%.

So what

In the third quarter, Autodesk's sales rose 28% year over year to land at $661 million. On the bottom line, the company swung from a net loss of $0.12 per share to earnings per share of $0.29. Subscription revenue more than doubled and now accounts for 76% of Autodesk's annualized recurring revenue.

The average Wall Street analyst would have settled for earnings near $0.27 per share on sales in the neighborhood of $640 million. Autodesk stomped both of these consensus targets.

Management set fourth-quarter guidance targets for both earnings and revenue above the current Street views.

Three happy office workers celebrate something good on one young lady's laptop screen, just out of view.

Image source: Getty Images.

Now what

The $875 million all-cash buyout of privately held construction software specialist PlanGrid should boost AutoDesk's existing presence in that market. In the long run, management hopes to turn AutoDesk into an all-around "design and make" company that can provide tools for every step of the way in the design and manufacturing process. PlanGrid brings 12,000 customer accounts and 120,000 users to the table.

This stock has now gained 29% year to date, thanks to a steady stream of good-looking earnings reports. That being said, it's not a cheap stock at 42 times forward earnings and 111 times free cash flows. I'd like to see AutoDesk stabilizing its bottom line before I take much of an interest in the stock.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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