Please ensure Javascript is enabled for purposes of website accessibility

Autodesk on Autopilot

By Anders Bylund – Updated Nov 15, 2016 at 5:29PM

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

Autodesk tops estimates, but still gets no love from Wall Street.

Anyone who works with computer-aided design (CAD) is familiar with Autodesk (NASDAQ:ADSK), maker of the world's most popular CAD software. AutoCAD provides 44% of this company's revenues, and this quarter, that was enough to push earnings and sales past earlier guidance and analyst expectations.

Net GAAP income for the quarter was $49 million, or $0.20 per diluted share. Backing out stock-based compensation and other items leaves $0.32 per share of non-GAAP earnings; analysts wanted to see at least $0.31. It's all derived from $436 million of sales (up 22.8% over the year-ago quarter), with 80% of that coming from software licenses and the rest from support and consulting services.

Autodesk continues to stave off competitors such as Parametric Technology (NASDAQ:PMTC) and Intergraph (NASDAQ:INGR) to maintain its chokehold on the mechanical, engineering, and industrial CAD markets. Customers' respect for AutoCAD's quality has given AutoDesk enough pricing power to grow gross margins every year for the last five years. (According to Capital IQ, those margins currently stand at 88%.)

This market power extends worldwide. Autodesk generated $170 million of revenues in the Americas this quarter, $164 million in Europe, and $101 million in the Asian/Pacific area. I think I've mentioned the power of geographic diversity before, and Autodesk is another great example of a company with a good cushion against local, regional, and even continental downturns.

The stock has been waffling up and down this year, and the latest report doesn't appear to change that. Even though all targets were met and forward guidance was upped, the stock price took a slight dive the day after earnings were released. Then again, Autodesk's stock has been on a tear since mid-2002. Despite the recent stagnation, today's price is more than five times what it was four summers ago.

Computer modeling and design clearly aren't going away. As long as Autodesk maintains its mindshare in the designer community, I'd say we're looking at an interesting stock idea for the long term here. Sometimes, a pullback may indicate a buying opportunity.

We've laid out related links:

What other software giant made Fool value guru Philip Durell's list as a bargain buying opportunity? Find out with a free 30-day trial to Motley Fool Inside Value.

Fool contributor Anders Bylund can't design his way out of a paper bag, and he does not own any of the companies mentioned -- or their products. Foolish disclosure is always state-of-the-art.

None

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

Autodesk, Inc. Stock Quote
Autodesk, Inc.
ADSK
$184.56 (-1.38%) $-2.59
PTC Inc. Stock Quote
PTC Inc.
PTC
$106.04 (-3.02%) $-3.30

*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
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

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.