Friday, June 3, 2011

Ansys ( Nasdaq - ANSS ) -- Slight Reduction in Q2 Outlook

Ansys (ANSS $55.00) appears on track to produce excellent Q2 results.  The company is the leading provider of engineering simulation software encompassing a wide range of industries.  Order rates have accelerated over the past several quarters due to the improving economy and a product line upgrade that improved functionality and ease of use.  Deliveries have remained on track in the June period with the exception of Japan, which is Ansys's second largest geographic market.  Disruptions created by the earthquakes have caused some business to be postponed into Q3 and Q4.  The lost revenue is unlikely to be made up.  In fact, Japanese demand may remain relatively subdued for an extended time as the rebuilding process takes place, and customers decide where to go from here.  The rest of the company's business remains vibrant.  Cash flow continues to accumulate.  Ansys is exploring potential acquisitions.  Those transactions have been difficult to complete due to valuation differences.  We are reducing our 2011 revenue estimate by $10 million to reflect the slowdown in Japan.  We also have lowered our earnings estimate by a nickel.  Next year we estimate sales will advance 15% to $765 million as the Japanese market stabilizes.  Earnings could rise 19% to $2.80 a share.  Margins are likely to remain lofty due to the company's high level of recurring income and exceptional competitive position.

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