Nuance Communications, Inc. (NUAN)

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Nuance Communications, Inc. (NUAN) Q4 Earnings Preview: Costs A Drag On Earnings?

By: Rich Bieglmeier
November 21, 2013 09:20 AM


Nuance Communications, Inc. (NUAN) will release results for its fourth quarter and fiscal year ended September 30, 2013, after the market close on Monday, November 25, 2013. Nuance will provide a copy of prepared conference call remarks in combination with its press release. The conference call will begin at 5:00 p.m. EST and will include only brief comments followed by questions and answers.

Wall Street anticipates that the application software maker will make a profit of $0.29 per share for the quarter. iStock expects NUAN to top Wall Street's consensus number. The iEstimate is $0.30.

We aren't alone as Deutsche Bank feels Monday's Q4 results may signal a turning point for the company.

Nuance provides voice and language solutions for businesses and consumers worldwide. Perhaps, the iPhone's Siri rings a bell. Yep, Siti is powered by Nuance's speech recognition capabilities. Or maybe you've heard the commercials for their Dragon speech recognition software, Nuance too.

Typically, Nuance doesn't stray too far from the consensus EPS view. The range of earnings results runs from a miss of $0.04 to bullish surprise of a nickel. Most of the time, the Nasdaq 100 company's earnings exceed the street's expectations. Nine of the last 16 quarterly checkups were bullish surprises. Three of the remaining seven were of the bearish variety with four on-target announcements.

While earnings have typically been better than forecasted, NUAN's stock price fell more often than not in the three-days surrounding earnings announcements. The software company's shares fell nine of the last 16 by an average of -9.48%. That's an uncomfortable figure. A lucky seven times, shareholders were rewarded with an average gain of 6.14% with a range of 0.20% to 12.20%.

iStock has some concerns after reviewing the tech company's latest 10-Q. Year-over-year (YoY) revenue increased by 8.8% in the third quarter; however, a the two biggest costs and expenses rose at a much faster pace: general and administrative expenses hiked 17.99% higher and professional services and hosting increased 21.91%. Total cost of revenues plus total operating expenses jumped by 12.52%, which is not good for margins when sales moved forward by the already mentioned 8.8%.

We also have some concerns that revenue could be a little light as search volume intensity for the flagship Dragon software are down 18.46% YoY, according to Google Trends. Meanwhile, Wall Street is expecting a decline on sales of just 0.10%; in other words, flat compared to 2012's fourth quarter.

Overall: If costs continue to outpace revenue growth, and sales are lighter than expected, then Nuance Communications, Inc. (NUAN) shareholders will have to rely on forward guidance for Monday's announcement to be a turning point.
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http://www.istockanalyst.com/finance/story/6660700/nuance-communications-inc-nuan-q4-earnings-preview-costs-a-drag-on-earnings

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