What's Going On With Nuance Communications?

Nuance Communications reported its fourth-quarter results on Monday. The company earned $0.41 per share in the quarter, topping expectations of $0.35 per share, while revenue of $504.1 million fell slightly short of the $507.84 million analysts were expecting.

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Analyst's Take

Nandan Amladi of Deutsche Bank commented in a note that Nuance delivered a "robust finish" to its fiscal year, with bookings and recurring revenue metrics coming in stronger than traditional licenses. At the same time, the company's operating margins rose above the 30 percent mark on cost controls.

Amladi continued that Nuance's bookings for on-demand and recurring revenue in healthcare were partly derived from the ICD-10 deadline on October 1 and an increasing focus on clinical documentation quality. Meanwhile, automotive has remained a "bright spot" in the "lackluster" mobile and consumer segment, while enterprise ad imaging "remain soft" from on-demand projects that are due to come live in fiscal 2016.

A Look Ahead

Looking forward to fiscal 2016, Amladi stated that the company's full-year earnings was "just above" consensus estimates while revenue guidance is in range, "leaving some headroom." In addition, roughly $75 million of the $125 million operating expenditure program has already been implemented and the company still has $490 million remaining in its share buyback authorization.

Bottom line, Amladi stated, "Investors will begin to re-rate Nuance's multiple in coming quarters as both value and growth investors revisit the story."

Shares remain Buy rated with a price target raised to $30 from a previous $25.

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