Progress Software Corporation (NASDAQ:PRGS) share price rebounded almost 17% after exceeding earnings expectations for the second quarter. Its shares are trading around $40, a sharp high compared to the 52-week low of $30. Progress Software strengthens traders confidence with in-line revenue guidance for the third quarter and the rest of the year.
Unexpected positive results combined with significant margin growth led analysts to improve their ratings for Progress Software Corporation. Benchmark, for instance, has upgraded its rating from ‘Sell’ to ‘Hold’.
Progress Software Strengthens Traders Confidence with Outstanding Second Quarter Results
Progress Software’s second-quarter revenue and earnings have beaten analysts’ consensus estimates by $1.18 million and $0.07 per share. Although the second-quarter revenue grew only 3% year over year, its potential to turn soft revenue growth into big profits enhanced investors’ confidence in its future fundamentals.
The company generated year-over-year earnings per share growth of 43% in the second quarter, thanks to higher gross and operating margins. The company believes its strategy of investing in higher margin areas, lowering costs, and enhancing operational efficiencies has led it to generate robust growth earnings per share.
Progress Software Strengthens Traders Confidence with Earnings Growth
Progress Software Corporation generated significant growth in its cash flows, mainly due to the massive increase in its earnings.
Its operating cash flow was standing at around $42 million in the second quarter, whereas its capital requirements were at $1.8 million. Thus, the company was left with $40 million in free cash flows compared to dividend payments of $4.6 million. The gap in free cash flows and dividend payments allows the company to invest more in growth opportunities.
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Although it has been increasing its quarterly dividends at a double-digit rate, the company plans to improve shareholders’ returns in the coming years. Progress Software management says they will return 75% to 80% of their annual operating cash flow to investors in the form of share buybacks and dividends by the end of 2019.
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