UPDATE: Nomura Reiterates Neutral Rating, Raises PT on The Ultimate Software Group Following Solid 2Q13 Report

In a report published Wednesday, Nomura analyst Frederick Grieb reiterated a Neutral rating on The Ultimate Software Group ULTI, and raised the price target from $96.00 to $125.00. In the report, Nomura noted, “Ultimate reported 2Q'13 recurring revenues of $80.8mn, essentially in line with the consensus estimate of $81.0mn and up 25% yoy. Additionally, Ultimate posted total revenues of $97.5mn, in line with consensus estimates of $97.2mn. On the whole, we believe the in-line top-line results will be the biggest focus for investors. In addition to solid recurring revenue results, Ultimate reiterated its FY'13 revenue guidance for yoy growth of 23%, in line with consensus estimates of 23% yoy growth. Ultimate reported 2Q'13 operating margin of 17.2%, up 430bps yoy and above our 14.2% estimate. Management stated that the operating margin in the quarter benefited from a combination of revenue mix and improved leverage. While we have a favorable view of Ultimate's product offering, the company's strong, customer-service-focused culture, as well as management's more aggressive sales and marketing spend, we see limited upside to near-term estimates and remain on the sidelines for now.” The Ultimate Software Group closed on Tuesday at $130.43.