Manhattan Associates Stock Plummets 25% After Q4 Earnings Report

Shares of Manhattan Associates tumbled 25% following disappointing guidance in their Q4 earnings report. Investors were previously optimistic, but the forecast of revenue growth only hitting 2.5% and an expected EPS decline have caused concern.

Date: 30-01-2025

AI Rating: 4

Impact of Earnings Report on Stock Prices
Manhattan Associates (NASDAQ: MANH) experienced a significant drop in share price due to its recent fourth-quarter earnings report. Although the company reported a 7% revenue growth and a 14% adjusted earnings per share (EPS) growth, the guidance for the future left much to be desired.

Specifically, the projected revenue growth of only 2.5% for 2025 and a forecasted adjusted EPS decline of 5% disappointed the market, leading to a dramatic price adjustment. Such guidance is critical as it shapes investor expectations and future valuations, which are often reflected in stock prices. The abrupt change in outlook suggests that the stock was previously priced for higher growth, causing investors to reassess its value under the new projections.

Free Cash Flow and Valuation Metrics
Prior to the earnings announcement, Manhattan Associates was trading at 63 times free cash flow (FCF), indicating it was priced for perfection. Post-report, the valuation has adjusted to 47 times FCF, presenting the stock as a more reasonable investment option, albeit amid concerns of growth slowdown. The FCF and high return on invested capital (ROIC) of 82% suggest the business has strong fundamentals, though short-term cyclicality is currently affecting revenue from services.

Long-term Outlook
Despite the disappointing short-term guidance, the longer-term prospects for Manhattan remain promising. The firm leads in its niche for both order management and point-of-sale systems, which positions it well as consumer behavior shifts towards an omnichannel approach. The growth in remaining performance obligations (RPO) by 25% compared to the end of 2023 indicates that the company may not face a prolonged slowdown and could see recovery beyond 2025.

Stocks: MANH