Constellation Software Profit and Sales Climb on Deals, but EPS Trails Forecasts

what happened

Constellation Software reported higher third-quarter profit and revenue, aided by businesses it recently acquired, according to Dow Jones Newswires. The company builds its model around buying smaller software developers. On Friday it earned 212 million dollars, or 10.01 dollars per share, compared with 210 million dollars, or 9.89 dollars per share, a year earlier.

Analysts surveyed by FactSet had pencilled in 15.17 dollars per share. Revenue climbed 19% to 3.51 billion dollars, slightly above the 3.50 billion dollars forecast. Acquisitions drove most of the increase, while organic revenue rose only 2%.

Recurring maintenance and other subscription-style income, the bulk of sales, grew to 2.72 billion dollars from 2.21 billion. Professional services climbed to 569 million dollars, hardware and other sales rose to 131 million, and licensing income dropped to 97 million dollars from 107 million.

why it matters

The key question for investors is the gap between revenue and earnings per share: sales came in a touch above expectations, while per-share profit landed well below consensus. Organic growth of just 2% suggests the expansion is coming from purchases rather than the existing business.

market impact

Constellation Software shares: revenue beat, but EPS missed forecasts, a mixed signal for the stock

• ↔Constellation Software shares mixed — revenue above forecast, but earnings per share below analyst expectations

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