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Investing.com -- Swiss enterprise software firm Temenos (SIX:TEMN) saw its shares soar more than 18% on Wednesday after it reported a surprisingly strong second quarter, rebounding from a softer first quarter with solid revenue growth and a significant earnings beat.
Group revenue rose 17% year-on-year in constant currency, coming in 13.4% above consensus.
Total (EPA:TTEF) software licensing revenue reached $124.9 million, up 24% year-on-year and 25% ahead of expectations.
Annual recurring revenue (ARR) increased 11%, accelerating from 9% growth in the previous quarter.
Operating profit jumped 28% in constant currency, with EBIT landing 37.4% above consensus and the EBIT margin rising to 40.2%, well above the expected 33.2%.
Free cash flow grew 8% to $65 million, slightly ahead of the consensus estimate.
Following a strong second quarter, Temenos raised its full-year guidance across revenue, EBIT, and EPS. The company now expects ARR growth of over 12% in constant currency, while Subscription & SaaS revenue is projected to grow “at least 6%.”
Adjusted EBIT growth is now guided above 9% in constant currency, up from over 5% previously, and adjusted EPS is expected to rise 10–12%, compared to the earlier 7–9% range.
"After a challenging Q1, Temenos has delivered a strong beat and raise, outperforming the company’s own Q225 guidance," Morgan Stanley (NYSE:MS) analyst Adam Wood said in a note.
"While the implied FY25 upgrade is modest, we’d expect the stock to be up low teens %, given low expectations into the quarter," he added.
Separately, Bank of America analysts noted that despite a strong second quarter, the modest increase in Temenos’ 2025 guidance suggests a "prudent" outlook for the second half (H2).
The company’s subscription and SaaS revenue grew 12% in the first half, compared to full-year guidance of over 6%. This, analysts say, implies H2 growth of around 3.5%.
Similarly, the upgraded EBIT guidance of over 9% suggests second-half growth of just over 4%, following a 19% increase in the first half, BofA’s team noted.
"TEMN continues to execute on its strategic roadmap, with commercial traction and U.S. expansion strategy on track, but we remain prudent mid term on demand uncertainty," the analysts said.
BofA reiterated its Neutral rating on the stock and lifted its price target to CHF73 from CHF71.