EMR - Aspen Tech plunges to 9-month low on Q3 results; William Blair downgrades stock

2023-04-27 14:18:20 ET

Aspen Technology ( NASDAQ: AZPN ) on Thursday fell 24% to a nine-month low, a day after the company reported results for its fiscal third quarter.

The company was downgraded to Market Perform from a previous investment rating of Outperform by analysts at William Blair. They said the chemicals market is weakening and there are signs of “integration pains” with Emerson Electric’s ( EMR ) industrial software businesses.

“DGM [digital grid management] sales cycles are taking longer than expected and SSE [subsurface science and engineering] contract lengths are not expanding as management had hoped,” Matthew Pfau, analyst at William Blair, said in an April 27 report. “Although the updated guidance accounts for these issues, there is the potential for more issues down the road.”

Aspen ( AZPN ) on Wednesday reported results for its fiscal Q3 ended in March. Revenue rose 22% from a year earlier to $229.9 million and missed the consensus estimate among Wall Street analysts of $285.6 million. Adjusted EPS of $1.07 was less than the average forecast for $1.74, as tabulated by FactSet.

Aspen ( AZPN ) updated its full-year guidance for adjusted EPS of $5.63 to $5.83 and total revenue of $1.04 billion to $1.06 billion.

Aspen's ( AZPN ) planned acquisition of Micromine for $623 million, which awaits regulatory approval, may lead to additional complications with integrating their businesses.

“We would like to get some more visibility into these moving pieces before becoming more bullish on the stock,” according to William Blair. “Key risks include Aspen’s ( AZPN ) concentrated exposure to the energy and chemical markets as well as variability around closing larger deals.”

Emerson ( EMR ) and Aspen ( AZPN ) last year combined Emerson’s ( EMR ) industrial software businesses. The deal resulted in Emerson’s ownership of 55% of Aspen ( AZPN ), with the remainder owned by Aspen ( AZPN ) shareholders.

Seeking Alpha contributor Gino Bruno D'Alessio rates Aspen Technology as a Sell because of its valuation .

More on Aspen Technology

• Aspen Technology Q3 2023 Earnings Call Transcript
• Emerson integrates AspenTech industrial AI software into Plantweb ecosystem

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