Here’s Why Progress Software Plunged 8% After Its Earnings Report
Shares of Progress Software (NASDAQ: PRGS), a cloud-based provider of business applications, plunged by more than 8 percent Wednesday afternoon following the release of its third quarter results.
Progress Software said that it earned $0.44 per share in the third quarter on revenue of $102 million. However, Wall Street analysts were expecting the company to earn $0.45 per shar eon revenue of $104.72 million.
The top and bottom line miss wasn’t the only disappointing aspect of the earnings print. The company guided its full year fiscal 2016 non-GAAP earnings per share to a range of $1.57 to $1.60 on revenue of $410 million to $413 million. Similarly, the company’s outlook fell short of Wall Street’s expectations who were modeling the company to earn $1.61 per share on revenue of $414.09 million.
Phil Pead, CEO at Progress, said, “Our third quarter was highlighted by a strong performance from our Data Connectivity and Integration segment, along with healthy maintenance renewals for both OpenEdge and our Telerik solutions, and solid cash flows. We’re looking forward to a strong fourth quarter, and the upcoming release of our DigitalFactory solutions will provide us with additional growth opportunities for the future.”
Prior to the earnings release, Progress Software’s stock was trading higher by nearly 20 percent since the start of 2016 but the earnings miss and poor outlook put a damper on investor sentiment even though there were some positives in the quarter. Specifically, net income for the quarter rose to $7.6 million from a net loss of $4.1 million in the same quarter a year ago.
The company also confirmed it bought 0.4 million shares of its own stock worth $11.5 million as part of a commitment to repurchase up to $200 million of its shares. The company also announced a quarterly dividend of $0.125 per share.
Of particular note to investors, analysts at Ladenburg downgraded Progress’ stock on September 13 due to its valuation. Specifically, the analysts argued the stock was trading multiple that is higher than its five-year average and at a premium to its software peers that are also growing at a similar impressive rate.