PeopleSoft jumps on earnings surprise
Several analysts upgraded the stock this morning: CSFB raised it from "hold" to "buy,"; Goldman Sachs raised it from "market outperform" to "recommend"; and Morgan Stanley raised it from "neutral" to "strong buy."
Shares were up $6.07 to $36 in late morning trading.
On Wednesday, PeopleSoft reported a profit of $36.1 million, or 11 cents per diluted share, up from $11 million, or 4 cents per diluted share, in the year-ago quarter. Analysts were expecting the company to come in at around 9 cents, according to First Call consensus.
Revenue for the quarter was up 34 percent from a year ago to $503 million.
PeopleSoft makes what is known as enterprise resource planning software, which helps companies manage things like accounting, manufacturing, supply chains and human resources.
The company's main competitors include major software companies such as Oracle and SAP, some of which have not fared as well in a difficult economic environment. Oracle, for instance, recently announced plans to reduce its work force by 1 percent to 2 percent amid spending cuts.
Analysts praised PeopleSoft's ability to beat expectations in light of its competitors' troubles. Credit Suisse First Boston analyst Brent Thill said PeopleSoft "turned on the (first-quarter) afterburners to scream by the carnage of multiple software earning wrecks."
"Key to the company's success this quarter and over the past year is delivering software that lives up to its marketing pitch," he wrote in a research note. "Many of the competitors still haven't lived up to the fancy slides in their PowerPoint presentations."
And PeopleSoft could actually benefit from the tough economic times,Goldman Sachs analyst Thomas Berquist said.
"In the current environment customers want to work with 'safe' vendors, and PeopleSoft fits this mold," Berquist wrote. He also praised the company's multiple offerings and the fact that it appears to be gaining share vs. its competitors.
He raised revenue estimates to $2.05 billion from $1.99 billion and earnings estimates to 58 cents a share from 55 cents a share.
Not everyone was so upbeat, however. Robertson Stephens analyst Eric Upin said though he could make an argument for upgrading the stock, "we remain our cautious outlook at this time based on the weaker economic environment, saturation and slowing adoption in the software industry, company-specific challenges and valuation."
He noted that although PeopleSoft's financial figures have steadily improving, its overall software license revenue has been lower than other major vendors. PeopleSoft projects license revenue for 2001 of about $670 million, compared with $695 million forecast by i2, $1.4 billion at Siebel Systems, $1.4 billion at Oracle and $2.4 billion at SAP, he said.