Needham & Company Remains Sidelined Following Nuance Communications' (NUAN) Mixed 2Q
Needham & Company reiterates a Hold rating on Nuance Communications (NASDAQ: NUAN) following the company's 2Q earnings report. Nuance’s $487.4m revenue was below $491m consensus, but EPS of $0.38 beat consensus of $0.35. NUAN reduced FY16 revenue guidance by $15m at the midpoint to $1975-2005m from $1980-2030m. EPS was raised by $0.06, both as a result of the buyback of 26.3m shares from the Icahn group last quarter and earlier than expected cost savings from transformation initiatives.
Analyst Scott Zeller commented, "The Nuance MarQ results were mixed, with anemic revenue performance and a continued strong showing for EPS and cost control. NUAN is well-into its $125m cost control program, achieving more than the targeted savings 6mos ahead of schedule. Looking forward, the four business units remain anemic with mixed results by product, and the “net” impact is a 0%-1% revenue growth scenario. FY16 guidance was trimmed by -15m, but increased by +0.06 EPS, as cost cutting continues. We believe the operating efficiencies have helped support EPS, yet we do not see a clear revenue driver for NUAN. The recent step-out and sale of roughly 50% of shares back to NUAN by Icahn suggests to us the activist did not see a near-term, material catalyst. Shares closed near $17.21, or 13x our $1.60 FY17 EPS, plus net-debt and 3.5x EV/FY17 revenue."
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Shares of Nuance Communications closed at $17.21 yesterday.