AspenTech Earnings: Long Term Intact After in-Line Results, Factoring in Slippage From Large Deal

Wide-moat AspenTech reported fiscal second-quarter results which came in slightly below our revenue and profitability estimates. One large renewal worth $5.4 million in annual contract value, or ACV, and free cash flow did not materialize as expected, which drove the modest shortfall. Had this deal been renewed as expected, results would have been in line with our expectations. We view this deal slippage as normal and do not believe it has any bearing on AspenTech long-term. The firm is near to closing this transaction and expects to do so in the third quarter. In our view, the firm is well-positioned to capitalize on secular energy and electrical grid trends and will benefit from capital-intensive industries facing the challenge of meeting increasing resource demand in a maintainable way. After considering results and guidance, we maintain our $195 per share fair value estimate and view the stock as fairly valued.