Wednesday, May 28, 2014

Compuware Corporation (CPWR) Q4 Earnings Preview: Tough Mix for A Beat

Compuware Corporation (NASDAQ:CPWR) will report results for its fourth quarter and full-year fiscal 2014 -- ended March 31, 2014 -- after market-close on May 22, 2014. The company will also hold a conference call to discuss these results at 5:30 p.m. Eastern time on May 22.

Wall Street anticipates that Application Software company will earn $0.08 per share for the quarter, which is $0.03 more than last year's profit of $0.05 per share. iStock expects Compuware to hit Wall Street's consensus number, the iEstimate is $0.08, too.

Sales, unlike earnings, are expected to fall, slipping 12% year-over-year (YoY). Compuware's consensus revenue estimate for Q4 is $211.23 million, which is less than last year's $239.92 million.

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Compuware Corporation delivers services, software and practices that enables technologies to perform at their peak. The Company delivers these solutions through software that is installed and run on its customers' owned hardware and applications (on-premises) and through a Software-as-a-Service (SaaS) model accessed via its hosted networks (Technology and Network Operations section).

CPWR has done a solid job managing Wall Street's expectations. Earnings bypassed the street's consensus outlook eight of the last 16 quarters; hit the target five times and fell short just three occasions.

The average bullish surprise was 22.83% more the forecasted with a range of 9.09% to 50% above consensus. Meanwhile, the trifecta of misses were -9.09%, -16.67%, and -20.00% less than projected.

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While surprises were lopsided towards bullish beats, EPS-driven price sensitivity is symmetrical with shares rising and falling eight times each. The average green reaction added 4.85% to the stock in the days surrounding the announcement while the average loss was -4.76% - symmetry.

Looking at the tech company's most recent financial statement, the most glaring problem is falling sales, obviously. In order for earnings to rise while sales slide, CPWR will need to cut costs to increase margins.

Based on Q3's 10-Q, that ain't happening. In the last quarter, sales dipped a modest -2.85% while total operating expenses moved higher by a slim 1.1%. These numbers need to be heading in the opposite direction.

Overall: Compuware Corporation's (NASDAQ:CPWR) rising costs, however so slight, while sales fall could make it difficult for CPWR's bottom-line to increase while the top-link shrinks. 

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