Why Nuance Communications, Inc. Stock Soared Today

By Steve SymingtonMarketsFool.com

Image source: Nuance Communications.

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What happened

Shares of Nuance Communications (NASDAQ: NUAN) are up 10.6% as of 11: a.m. EDT Friday after the computer software technology company released stronger-than-expected fiscal fourth-quarter 2016 results.

So what

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Based on generally accepted accounting principles (GAAP), quarterly revenue climbed 0.4% year over year, to $506.2 million, while net income swung to $18.5 million, or $0.06 per diluted share, compared to a GAAP net loss of $11 million, or $0.04 per share in the same year-ago period.

On an adjusted basis, which adds perspective by including revenue lost to accounting treatment in conjunction with acquisitions, revenue fell 0.2% year over year, to $512.4 million. Recurring revenue also increased 400 basis points year over year during the quarter, representing 70% of total revenue. And adjusted net income -- which excludes items like acquisitions costs and stock-based compensation -- declined 8.6% year over year, to $118.6 million, and remained flat on a per-share basis at $0.41.

For perspective, Nuance's guidance (provided with last quarter's report in August) called for lower adjusted revenue between $498 million and $512 million and lower adjusted earnings per share between $0.37 and $0.41.

Now what

According to Nuance CFO Dan Tempesta:

More specifically for the current fiscal first-quarter 2017, Nuance expects adjusted revenue between $483 million and $497 million and adjusted earnings per share between $0.32 and $0.35. For the full fiscal-year 2017, Nuance expects adjusted revenue of $2.02 billion to $2.07 billion, including organic revenue growth of 1% and adjusted earnings per share between $1.53 and $1.63.

All things considered, this was an undeniably strong quarter for Nuance as it begins to realize the benefit of its ongoing business transition to cloud-based offerings and higher recurring revenue. Assuming Nuance can sustain this upward business momentum going forward, I see no reason the stock won't continue to follow suit.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Nuance Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.