Quarterly results are a good time to review a company’s progress, especially relative to its industry peers. Today, we’re looking at Bentley (NASDAQ:BSY) and the best and worst performers in the software vertical.
Software is taking over the world, and while many solutions such as project management or video conferencing software can be useful for a wide range of industries, some have very specific needs. As a result, vertical software, which focuses on industry-specific workflows, is growing and is fueled by the pressure to improve productivity, whether it’s a life sciences, education, or banking company.
The 4 vertical software stocks we track reported a strong second quarter. As a group, revenues beat analysts’ consensus estimates by 2.7%, while revenue forecasts for the next quarter were 7.5% higher.
After much tension, the Federal Reserve cut its policy rate by 50 bps (half a percent) in September 2024. This marks the central bank’s first monetary policy easing since 2020 and the end of its most targeted anti-inflation campaign since the 1980s. Inflation had been high in 2021 post-COVID due to a confluence of factors including supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) numbers have been supportive of late, employment measures have raised some concerns. Going forward, markets will debate whether this rate cut (and more potential cuts in 2024 and 2025) is the perfect time to support the economy or a bit too late for a macro that has already cooled too much.
Fortunately, vertical software stocks have proven resilient, with share prices up an average of 9.4% since the last earnings report.
Slowest Q2: Bentley (NASDAQ:BSY)
Bentley Systems (NASDAQ:BSY), founded by brothers Keith and Barry Bentley, provides a software-as-a-service platform that spans the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater treatment plants.
Bentley reported revenue of $330.3 million, up 11.3% year-over-year. The print topped analysts’ expectations by 1.6%. Despite the top-line beat, it was still a mixed quarter for the company, slightly beating analysts’ billings estimates but missing analysts’ ARR (annual recurring revenue) estimates.
CEO Nicholas Cumins said: “Our performance in 24Q2 and the first half provides a solid foundation for the full year, with very positive end-market and operational momentum. Our year-on-year ARR growth of 11% on a constant currency basis (11.5% excluding China) is consistent with the previous quarter. Public Works/Utilities and North America remained the key growth drivers and we continued to add new small and mid-market accounts at a rapid pace, reflecting healthy market conditions.
Bentley was the weakest performer against analyst estimates of the entire group. Interestingly, the stock is up 11.2% since the report and is currently trading at $49.80.
Is now the time to buy Bentley? Check out our full earnings analysis here, it’s free.
Best Second Quarter: Guidewire (NYSE:GWRE)
Guidewire (NYSE:GWRE) was founded by two individuals who helped develop Ariba, the leading procurement software company. The company provides insurance companies with a software-as-a-service platform to sell their products and manage their workflows.
Guidewire reported revenues of $291.5 million, up 8% year-over-year, beating analyst expectations by 2.7%. The company had an exceptional quarter, impressively beating analysts’ billings estimates and significantly improving gross margin.
Guidewire has secured the largest full-year guidance increase among its peers. The market appears pleased with the results, as the stock has risen 21.4% since the report. It currently trades at $174.65.
Is now the time to buy Guidewire? Check out our full earnings analysis here, it’s free.
Manhattan Associates (NASDAQ:MANH)
Manhattan Associates (NASDAQ:MANH) focuses on large consumer goods and pharmaceutical companies, providing a software-as-a-service platform that enables customers to manage their supply chains.
Manhattan Associates reported revenue of $265.3 million, up 14.8% year-over-year, beating analysts’ expectations by 3.5%. It may have had the worst quarter among its peers, but the results were still good, as it also posted a significant improvement in its gross margin and full-year revenue guidance that beat analysts’ expectations.
Interestingly, the stock is up 21.8% since the results and is currently trading at $275.17.
Read our full analysis of Manhattan Associates’ results here.
Alarm.com (NASDAQ:ALRM)
Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ:ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances through a single app.
Alarm.com reported revenue of $233.8 million, up 4.4% year over year. This figure beat analysts’ expectations by 2.9%. Overall, it was a strong quarter, as it also recorded a solid beat on analysts’ billings estimates and its full-year revenue forecast beat analysts’ expectations.
Alarm.com had the slowest revenue growth and the weakest full-year guidance update among its peers. The stock has fallen 16.9% since the report and is currently trading at $54.54.
Read our full, actionable report on Alarm.com here. It’s free.
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