News

What happened

Shares of Cerence (NASDAQ: CRNC), a software company focusing on mobility, plummeted today after the company reported its fiscal third-quarter results for the period ended June 30. The company beat analysts' consensus bottom-line estimate but missed Wall Street's top-line expectations and issued guidance that was worse than expected.

The tech stock was down by 22.6% as of 12:25 p.m. ET.

So what

Cerence reported non-GAAP (adjusted) earnings per share of $0.43, which were down from $0.62 per share in the year-ago quarter but slightly ahead of analysts' average estimate of $0.42.

Investors were disappointed to see that the company's third-quarter revenue declined 8% year over year to $89 million and fell below Wall Street's expectation of $91.7 million.

But it was the company's guidance for the fourth quarter and full-year outlook that likely sent Cerence's stock into a tailspin today.

The company's management said that fourth-quarter revenue will be in the range of $52 million to $58 million -- far below analysts' consensus average of $98.5 million.

Cerence's full-year sales outlook isn't much better, with management expecting revenue in the range between $322 million and $328 million -- a significant miss compared to Wall Street's expectation of about $370.9 million.

Now what

Cerence's CEO Stefan Ortmanns said in a press release that "Notwithstanding external headwinds, we are invigorated for the future and confident in our direction."

But the headwinds the company is facing right now are significant. In a presentation, the company's management said that inflation, recession concerns, and a continued chip shortage in the automotive industry are all threats to the company right now.

With the company's third-quarter results missing top-line expectations and Cerence's guidance for the upcoming quarter and full-year falling below expectations, it's no surprise this tech stock is slipping today.

10 stocks we like better than Cerence Inc.
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Cerence Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

*Stock Advisor returns as of July 27, 2022

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Cerence Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.