Please ensure Javascript is enabled for purposes of website accessibility

Why Aspen Technology Stock Was Falling Today

By Jeremy Bowman - Jan 30, 2020 at 4:27PM

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 industrial technology stock slipped on weaker-than-expected earnings.

What happened

Shares of Aspen Technology (AZPN) were sliding today after the industrial asset optimization specialist posted disappointing results in its second-quarter earnings report. As a result, the stock was down 13.9% as of 3:22 p.m. EST.

So what

Aspen came up short on both top and bottom lines as revenue fell 11% to $124.7 million, missing expectations at $136.1 million. Licensing revenue, its biggest business segment, fell 24.8% to $70.2 million, reflecting a 27% decrease in bookings to $112.3 million as the company had fewer term license contracts up for renewal compared with the year-ago quarter.

A digital of hard-hat worker with computer icons in his head

Image source: Getty Images.

On the bottom line, adjusted earnings per share fell from $0.92 to $0.66, missing estimates at $0.80, as the drop in revenue flowed through the income.

CEO Antonio Pietri said on the earnings call that the timing of contract renewals is not an indicator of the health or growth of the business, and that investors should focus on annual spend and annual cash flow. Annual spend, which is the annualized value of all term license and maintenance contracts, rose 10% in the quarter to $564 million, and the company expects full-year free cash flow of $260 million to $270 million, about 10% to 14% above last year's figure. 

He also added: "AspenTech delivered solid second quarter results highlighted by continued double-digit annual spend growth. While the macro environment in capital intensive industries was uncertain, spending remained favorable as customers recognized that investments in digitalization can drive meaningful improvements in the operating efficiency and financial performance of their business."

Now what

For its full-year guidance, the company called for annual spend growth of 10% to 12%, total revenue of $575 million to $615 million and adjusted earnings per share of $3.43 to $3.84. Both of the midpoints in revenue and EPS were down from 2019 results and below the analyst consensus at $602.4 million in revenue and $3.79 earnings.

Though Aspen is growing based on its own key metrics, that doesn't seem like enough to please the market as the technology company is still valued like a growth stock, and carries high expectations with that.

 

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

Aspen Technology, Inc. Stock Quote
Aspen Technology, Inc.
AZPN

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

Motley Fool Returns

Motley Fool Stock Advisor

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

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/24/2022.

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.