Workday pops on Q3, buyback, but 'mercurial market' keeps Monness, Crespi on sidelines
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Workday (NASDAQ:WDAY) shares jumped nearly 10% in premarket trading on Wednesday after the cloud computing software maker reported third-quarter results that beat expectations and unveiled a $500M buyback, but the "mercurial" nature of the market has kept investment firm Monness, Crespi, Hardt on the sidelines.
Analyst Brian White, who has a neutral rating on Workday (WDAY), noted that the company has continued to expand its reach, but the global economy does not look like it's getting better anytime soon.
"Workday continues to expand the reach of its cloud platform, and pursue a large market opportunity; however, we believe the darkest days of this downturn are ahead of us," White wrote in a note to clients.
White also noted that the tone on Workday's (WDAY) conference call was "balanced," as the company highlighted the strong execution in the third-quarter, but also touched on the uncertainty in the broader economic environment. 
"Verticals such as financial services and healthcare performed well, while the medium enterprise market proved resilient," White wrote. "However, sales cycles have stretched with some deals receiving greater scrutiny, especially net new opportunities with large enterprises." 
For the third-quarter, Workday (WDAY) earned an adjusted 99 cents per share on $1.599B, topping estimates of an adjusted 84 cents per share and $1.58B in revenue. Subscription revenue accounted for $1.43B of the $1.599B and the company said its 24-month subscription revenue backlog was $8.62B, up 21.1% year-over-year. 
Operating profit during the period came in at $314.2M, above expectations.
Looking ahead, Workday (WDAY) said it expects fourth-quarter revenue to be between $1.63B and $1.632B, with Wall Street is expecting $1.647B in sales.
The company also tweaked its outlook for fiscal 2023, as it now expects sales to be between $6.2B and $6.202B, compared to a previous forecast of $6.187B and $6.207B, along with subscription sales of $5.555B to $5.557B. Operating margin is also forecast to be 19.2% compared to 19% previously.
Looking ahead to fiscal 2024, Workday (WDAY) expects subscription revenue to be between $6.5B and $6.6B, along with higher operating margins than in 2023 by as much as 200 basis points.
Ahead of earnings, investment firm Baird noted expectations on Workday (WDAY) were "muted," setting up the potential for a surprise.