(By Rich Bieglmeier) Aspen Technology, Inc. (AZPN) is expected to report earnings after the market closes on Tuesday, August 21, 2012. Management will host the conference immediately afterwards.
Wall Street anticipates that AZPN will lose $0.07 for its 4th quarter. iStock expects the Business Software & Services to report earnings that will exceed Wall Street's consensus number. The iEstimate is a loss of 6 cents – a 1 cent upside surprise.
Aspen Tech provides software that optimizes supply chain management. As of June 30, 2011, the company's client list includes 19 of the 20 largest petroleum companies, all of the 20 largest chemical companies, and 15 of the 20 largest pharmaceutical companies. A who's who of who's who.
The formula for AZPN shareholders has been fairly simple following earnings announcements, beat the street and the stock usually rallies, nicely too, or miss with a mild sell off.
In the last eleven quarterly checkups, Aspen Technology surpassed the consensus number seven times. On the bullish beats, the stock price gained an average of 10.51%, with a range of -2.90% to 28.20%. Shares rocked 14 and 14.5% the last two times.
For the four disappointments, the technology stock's price was reduced by an average 1.63%, with a max loss of 5.3%, so far.
The second quarter has been a mixed bag for software companies as 37% have topped estimates, 45% were on target or better, and 55% made gains during the day's surrounding profit announcements.
According to iStock's view of AZPN's stock chart, the stock has been bobbing along its rising 50-day moving average. It's been a series of slightly higher highs and higher lows; a tight, upward trading channel with a range of about $1.50 from top to bottom.
If the price can push through $24 next Wednesday, then it's off to the races as shares will be traveling free of resistance at all-time high altitudes. A recent bullish MACD crossover might be hinting that the software company is positioned to take off.
And iStock couldn't find anything in the most recent 10Q that should hold Aspen Technology's earnings back. In fact, we rather like that the cost of sales is falling as a percent of revenue, down to 20% for the three months ended March 31, from 32% for the past nine months.
iStock is mildly concerned that costs rose faster than sales in the quarter, 20% versus 16.7%, respectively; however, for the previous three quarters, the cost of business is up only 5% with revenues climbing 32%.
Shrinking costs and rising revenue is usually a prescription for eps success as margins grow fatter. Perhaps, our iEstimate will prove to be conservative.
Overall, Aspen Technology, Inc.'s (AZPN) earnings' performance history, current revenue/cost trends, and position on its stock chart offers a reward to risk ratio that iStock feels favors traders heading into Tuesday's announcement.