JDA Software Group Earnings Preview

Charles is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Author's note: This post originally had an incorrect earnings release date. The information has been corrected.

JDA Software Group Inc. (NASDAQ: JDAS), a global provider of merchandising and supply chain enterprise software solutions, has yet to select an earnings release date, but right now analysts' average estimates are for EPS of $0.57 a share on revenue for the quarter of $171.27 million. Last year's earnings for the quarter came in at $1.08 per share on revenue of $163.61 million.  If JDA meets analysts' expectations, it means an earnings decrease of -47.22% on a mediocre revenue increase of just 4.68%.  Still, this is much improved over last quarter's (year end 2011) reported EPS of -$0.03 a share on revenue of $174.17 million[A2] . To be fair, the $1.08 reported EPS was a statistical outlier because full year earnings came in at $1.67 and only $0.41 for the prior year.  

While revenue is growing, accounts receivables have been rising faster than revenue.  Days sales outstanding - a measure of how long it takes to collect money owed - also has been rising and is at 68 days (4-qtr average).  Receivables on an average 4-quarter basis are at 75% of revenue, up from last year's average of 69%.  This suggests reluctance on the part of JDA to pressure clients to pay their bills. Operating cash flow was also negative last quarter, which is a common occurrence when receivables remain uncollected.

JDA competes with some industry heavyweights including Oracle Corporation (NYSE: ORCL); SAP AG (NYSE: SAP); and Manhattan Associates, Inc. (NASDAQ: MANH).  SAP reported second quarter revenue and EPS that best analysts' estimates, and the stock is up 3.74% to $58.85.  Oracle reported on June 18, and also beat earnings estimates for the quarter ($0.82 actual versus $0.78 estimated).  Manhattan will report Q2 results after the market closes on July 24.  Analysts estimate Manhattan's EPS will come in at $0.64 a share, but the company has demonstrated its ability to surprise Wall Street to the upside over the past four reporting periods.

For comparison, let's look at some income statement metrics for these four companies.  SAP reports in euros but I converted to dollars using $1.22 as a conversion factor.  Otherwise, these data are the latest available or estimated.  Net income is for the latest quarter.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Revenue</p> </td> <td> <p>Operating   Margin</p> </td> <td> <p>Net   Income</p> </td> <td> <p>Price/Earnings  </p> </td> </tr> <tr> <td> <p>JDA</p> </td> <td> <p>$171.27   million</p> </td> <td> <p>20%</p> </td> <td> <p>(1%)</p> </td> <td> <p>17.31</p> </td> </tr> <tr> <td> <p>Oracle</p> </td> <td> <p>$10.916   billion</p> </td> <td> <p>43%</p> </td> <td> <p>32%</p> </td> <td> <p>14.71</p> </td> </tr> <tr> <td> <p>SAP</p> </td> <td> <p>$4.782   billion</p> </td> <td> <p>22%</p> </td> <td> <p>13%</p> </td> <td> <p>16.47</p> </td> </tr> <tr> <td> <p>Manhattan</p> </td> <td> <p>$91.48   million</p> </td> <td> <p>20%</p> </td> <td> <p>12%</p> </td> <td> <p>18.33</p> </td> </tr> </tbody> </table>

The tables suggests Oracle to be the best bet for a growth stock pick because it is the largest company and has the best margins as well as the lowest PE ratio. In fact, I would put JDA as the bottom of this list of investment ideas. JDA's current price of $28.70 indicates a PE ratio of 17.3[A3] 1, which is higher than either the revenue or earnings growth trends.  Due to recent disappointing reports from other technology software companies such as Informatica Corporation, and the market's corresponding response, I would be concerned if I were a JDA shareholder or a holder of any company doing business in Europe for that matter.


 [A2]S&P Capital IQ

CACody has no positions in the stocks mentioned above. The Motley Fool owns shares of Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus