Unity Software Reports Smaller Loss, But Challenges Remain
Unity Software Inc. (U) reported a quarterly loss of $0.31 per share, which is better than the Zacks Consensus Estimate predicting a loss of $0.39. This stands in contrast to earnings of $0.18 per share from a year ago. These numbers are adjusted for non-recurring items.
Earnings Surprise and Revenue Insights
This report marks an earnings surprise of 20.51%. In the previous quarter, analysts had anticipated a loss of $0.44 per share, while Unity actually recorded a loss of $0.32, achieving a surprise of 27.27%.
Over the past four quarters, Unity has consistently exceeded consensus EPS estimates.
For the quarter ending in September 2024, Unity Software posted revenues of $446.52 million, surpassing the Zacks Consensus Estimate by 4.33%. This represents a decline from last year’s revenues of $544.21 million. The company has outperformed consensus revenue estimates for each of the last four quarters.
The future performance of Unity Software’s stock will likely depend on management’s insights during the earnings call, particularly regarding immediate price movements and future earnings expectations.
This year, Unity Software shares have fallen roughly 47%, contrasting sharply with the S&P 500’s gain of 24.3%.
Future Prospects for Unity Software
Despite its underperformance this year, investors are curious about what lies ahead for Unity Software.
Determining the future direction of the stock is challenging, but a significant factor is the company’s earnings outlook. This outlook encompasses expected earnings for upcoming quarters and how those expectations have changed recently.
Research indicates a strong link between short-term stock movements and earnings estimate revisions. Investors can independently track these changes or use rating tools like the Zacks Rank, known for effectively leveraging earnings estimate revisions.
Leading up to this earnings release, Unity’s estimate revisions trend appears unfavorable. Consequently, the stock currently holds a Zacks Rank of #4 (Sell), suggesting it may underperform the market shortly. For a comprehensive list of today’s Zacks #1 Rank (Strong Buy) stocks, click here.
It will be noteworthy to observe how estimates for the upcoming quarters and the current fiscal year evolve. Presently, the consensus EPS estimate stands at -$0.40 on revenues of $423.18 million for the next quarter, and -$1.86 on $1.76 billion in revenues for the current fiscal year.
Investors should consider that the outlook for the broader industry can significantly influence stock performance. The Zacks Industry Rank places Internet – Software in the top 25% of over 250 Zacks industries. Our research shows that the top half of Zacks-ranked industries outperform the bottom half by more than 2 to 1.
Another company in the same sector, Workday (WDAY), has not yet reported results for the quarter ending October 2024, with results expected on November 26.
Workday, which develops human resources software, is projected to announce quarterly earnings of $1.72 per share, representing a year-over-year gain of 12.4%. The consensus EPS estimate for the upcoming quarter has been revised down by 0.3% in the last month.
Workday’s expected revenues are $2.13 billion, reflecting a 14% increase compared to the same quarter last year.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
