Nuance Communications Inc. Beats Earnings Estimates, Shares Up

Nuance Communications Inc. Beats Earnings Estimates, Shares Up

Nuance Communications Inc. (NASDAQ:NUAN) reported quarterly earnings before the opening bell today of earnings per share of $0.33 on revenue of $502.3 million.  Analysts were looking for earnings per share of $0.27 on revenue of $510.80 million.  Year over year, revenue rose 6.1%, and full year earnings per share is forecast to hit $1.07.  Looking forward to full year 2015 guidance, Nuance forecasts to have earnings per share range of $1.10-1.20, on revenue of $480-490 million.  Shares are up 5% in premarket trading, as of this writing.

Nuance now ready to grow the business

Nuance Communications is a provider in voice recognition software and is best known for being the makers of Siri on Apple Inc. (NASDAQ:AAPL)’s iPhone.  Despite getting that contract, the company just recently officially broke even on an earnings per share basis and is now ready to grow the business.  Nuance has a market cap of $4.89 billion and is rated a “weak buy”.  Price to forward earnings comes in at 13.31, price to sales is at 2.58, price to book is at 1.87, price to cash comes in at 5.5, and price to free cash flow is at 16.28.  Total debt to equity comes in a bit steep at .92 and cash per share is at 2.78, giving the company a current ratio of 1.70.  Earnings are forecast to fall -156.90% this year, rise 7.88% next year and lose -.67% over the next five years.  Performance has not been exciting: -6.5% in past year and up .72% year to date.

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The company said in its earnings announcement that earnings was being driven by demand from the health care services industry.  Health care companies have been purchasing the company’s voice recognition software to help with documentation.  Nuance Communication has contracts with Avera Heath, BayCare, Cambridge Trusts, Cleveland Clinic, etc.  The demand from the health care industry was so big that it accounted for 47% of all revenue and revenue year over year from health care division rose 7%. “The economic improvement, the affordable healthcare act are the two main drivers for the increased usage of their healthcare services,” Avondale Partners LLC John Bright said” (Reuters).

Nuance got a a huge lift from the Affordable Care Act

Overall, Nuance Communication has been able to rebound and break even last quarter, giving management the opportunity to focus on growth, rather than just profitability.  Additionally, the company has gotten a huge lift from the Affordable Care Act, or Obamacare, as the health care industry continues to make up nearly half of its revenue.  Nuance may find it beneficial to determine where the weakest revenue growth is in its business and conduct a spin off or close that segment, this will help improve underlying earnings and improve outlook.

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