Wednesday, February 29, 2012

Ansys ( Nasdaq - ANSS ) -- On-Target Q4 Results

Ansys (ANSS $63.00) reported excellent on target Q4 results.  Earnings were reduced $.05 a share by a one time tax adjustment, relating the company's Japanese subsidiary.  That was a non cash item.  Future earnings and cash flow will benefit from a reduction in Japan's corporate tax rate.  Despite the charge non-GAAP income rose 5% to $.68 a share.  Sales advanced 22% to $202.9 million.  Performance was solid across Ansys's entire product line.  The automobile industry was especially strong, bolstered by the development of hybrid and more fuel efficient gasoline engines.  Energy, electronics, and aerospace also outpaced the corporate average.  Geographic demand remained steady.  Reported numbers bounce around from period to period because a lot of customers are multinationals that shift work around the globe.  But Ansys didn't experience any material change in actual purchase decisions.

Product line enhancements promise to enhance the company's already commanding advantage.  Competition remains limited to niche markets.  Acquisitions of leading up-and-comers have been made in the past.  That strategy is likely to be repeated in the future, reinforcing growth.  Cash flow generation continues to be abundant.  Operating margins are in the 50% range and produce far more money than the company requires for working capital and fixed asset investments.

Our 2012 estimates are unchanged.  Earnings appear headed towards $2.85 a share (+13%) on sales of $825 million (+18%).  Costs associated with an acquisition completed in 2011 are the main reason earnings will climb less briskly than revenue.  Long term organic growth of 15% annually appears sustainable.  Acquisitions promise to contribute additional leverage.

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