MANH) and vertical software stocks in the second quarter

The end of earnings season is always a good time to take a step back and look at who’s excelling (and who’s not so good). Let’s take a look at how vertical software stocks fared in the second quarter, starting with Manhattan Associates (NASDAQ:MANH).

Software is eating the world, and while a wide range of solutions, such as project management or videoconferencing software, can be useful for a wide range of industries, some have very specific needs. As a result, the software vertical, which addresses industry-specific workflows, is growing, fueled by pressure to improve productivity, whether in a life sciences, education or banking company.

The four vertical software stocks we track reported a strong second quarter. As a group, revenues exceeded analyst consensus expectations by 2.7%, while revenue expectations for the next quarter were 7.5% above.

After much tension, the Federal Reserve lowered its policy interest rate by 50 basis points (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most targeted anti-inflation campaign since the 1980s. Inflation started to spike in 2021 following the COVID-19 crisis due to a confluence of factors such as supply chain disruptions, labor shortages and stimulus spending. While CPI (inflation) numbers have been positive recently, employment measures have raised some concerns. Going forward, markets will debate whether this rate cut (and more potential rate cuts in 2024 and 2025) is the perfect timing to support the economy, or whether it’s a bit too late for a macro that’s already too much cooled down.

Fortunately, vertical software stocks have been resilient, with share prices up an average of 9.8% since the last earnings results.

Manhattan Associates (NASDAQ:MANH)

Manhattan Associates (NASDAQ:MANH) serves major consumer goods and pharmaceutical companies and offers a software-as-service platform that helps customers manage their supply chains.

Manhattan Associates reported revenue of $265.3 million, up 14.8% year over year. This print exceeded analyst expectations by 3.5%. Overall, it was a strong quarter for the company, with significant gross margin improvement and full-year revenue expectations exceeding analyst expectations.

Manhattan Associates scored the highest earnings forecast from analysts and the fastest revenue growth of the entire group. Unsurprisingly, the stock is up 20.8% since reporting and is currently trading at $273.

Is Now the Time to Buy Manhattan Associates? See our full analysis of earnings results here. It’s free.

Best Second Quarter: Guidewire (NYSE:GWRE)

Guidewire (NYSE:GWRE), founded by two individuals involved in the development of leading purchasing software Ariba, provides insurance companies with a software-as-a-service platform to help sell their products and manage their workflows.

The story continues

Guidewire reported revenue of $291.5 million, up 8% year over year, and beat analyst expectations by 2.7%. The company had an exceptional quarter with an impressive improvement in analyst expectations and a significant improvement in gross margin.

Guidewire achieved the highest full-year guidance increase among its peers. The market seems pleased with the results, as the stock is up 25.2% since reporting. It is currently trading at $180.05.

Is Now the Time to Buy Guidewire? See our full analysis of earnings results here. It’s free.

Slowest Q2: Bentley (NASDAQ:BSY)

Bentley Systems (NASDAQ:BSY), founded by brothers Keith and Barry Bentley, offers a software-as-a-service platform that focuses on the lifecycle of infrastructure projects such as road networks, tunnel systems and wastewater facilities.

Bentley reported revenue of $330.3 million, up 11.3% year over year, beating analyst expectations by 1.6%. Still, it was a mixed quarter as analysts’ ARR (annual recurring revenue) estimates were missed.

Bentley had the weakest performance compared to analyst estimates in the group. Interestingly, the stock is up 11.1% since the results and is currently trading at $49.78.

Read our full analysis of Bentley’s 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 allows users to control their security systems and smart home appliances from a single app.

Alarm.com reported revenue of $233.8 million, up 4.4% year over year. This print exceeded analyst expectations by 2.9%. Overall, it was a strong quarter as it also delivered solid improvement in analyst expectations and full-year revenue expectations that exceeded analyst expectations.

Alarm.com had the slowest revenue growth and the weakest full-year guidance update among its peers. The stock has fallen 17.9% since reporting and is currently trading at $53.85.

Read our full, actionable report on Alarm.com here. It’s free.

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