Ansys ( Nasdaq - ANSS ) -- Raising Estimates

Ansys (ANSS $48.00) reported excellent Q2 results.  Results topped our published forecast, although the rising momentum had been evident in the company's order rate since last fall when its latest software upgrade was released.  Non-GAAP earnings increased 24% to $.62 a share.  Revenues improved 18% to $162.2 million.  An acquisition announced on the last day of Q2 should reinforce the trend in upcoming periods.  That deal ensconced Ansys as the leader in mobile phone component simulation.  Power management is the new line's bread and butter.  That know how is likely to spread to additional energy saving applications in the computer field.  Demand was robust in all geographies except Japan, traditionally Ansys's second most important market.  Activity remains muted there but probably will recover over the next 1-2 years as the effects of the earthquake wear off. 

We are raising our full year earnings estimate by 6% to $2.50 a share.  Next year $2.75-$3.25 a share represents a realistic target.  The breakdown between annual and perpetual license sales, plus any impact by the economy, will influence the final amount.  Additional acquisitions may be pursued, creating the potential for additional leverage.  The long term outlook remains bright.  Ansys is the leader in simulation software used by engineers and product designers.  Organic growth is running in the 10%-15% range despite the relatively weak economic environment.  Overall growth is being amplified by the company's ability to reinvest cash flow (50% pretax margins) in complementary acquisitions.  Penetration of emerging markets could provide further impetus.  Downside risk is mitigated by the scarcity of direct competition and a high degree of recurring revenue from existing customers.

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