Autodesk reported strong results for its y/e 2015 second quarter

Here’s a portion of the "note" posted, this morning, about Autodesk by a Morningstar Research analyst:

Autodesk reported surprisingly strong second-quarter fiscal 2015 results. The firm upgraded its full-year fiscal 2015 guidance and now expects billings growth of 10%-12% (from 7%-9%), revenue growth of 7%-9% (from 4%-6%), a non-GAAP operating margin of 15-16% (from 14%-16%), and net subscription additions of 200,000-250,000 (from 150,000 to 200,000). The company noted a strong demand environment across all geographic segments, good adoption of suite products, and a continued successful transition to a subscription-based business model. As a result, we have updated our financial model and raised our fair value estimate to $54 from $51. We retain our wide moat rating.

For the quarter, revenue rose 13% to $637 million on a reported and constant currency basis. Revenue in the Americas, Europe, Middle East & Africa, Asia Pacific, and emerging economies all grew double-digits during the quarter and reflected a strong broad-based demand environment. Interestingly, standalone AutoCAD LT sales, which had been waning, were resilient during the quarter after the firm launched a desktop subscription offering, which helped boost the Flagship segment. Autodesk’s traditional Architecture, Engineering and Construction and Manufacturing businesses were strong given the adoption of building information modelling, industrial machinery, consumer, and automotive products. Non-GAAP operating margins remained under pressure, and slipped to 18% from 24% in the prior year, as the firm reinvested in its business model transition, cloud infrastructure, and bolt-on acquisitions.

Autodesk's subscription transition is progressing ahead of internal and external expectations. We think the company’s fiscal 2018 financial targets look appropriate and we are encouraged by the market’s adoption of subscriptions (74,000 new subscribers were added during the quarter). Still, the stock is trading slightly above our fair value and we would seek a wider margin of safety before investing.