Salesforce.com (CRM) Information Technology - Software | Reports February 28, After Market Closes

Key Takeaways

• The Estimize consensus is calling for earnings per share of 26 cents on $2.28 billion, 1 cent higher than Wall Street on the bottom line and right in line on the top
• Despite failing to make a splashy acquisition, Salesforce continues to astound investors with steadily improving financial performance
• Salesforce posted 8 consecutive quarters of 20% growth on the top line and expects to extend that streak with tonight's report

Salesforce prepare to announce fiscal fourth quarter results tomorrow after the closing bell. Expectations for the report remains in line with past performance, suggesting Salesforce should continue growing at a relatively rapid clip. Analysts at Estimize expect earnings of 26 cents per share, a 36% increase from a year earlier. That estimate increased by 3% in the past 3 months on wider adoption of the company’s cloud based solutions. Revenue for the period is forecasted to increase 25% to $2.29 billion, marking 8 consecutive quarters of over 20% growth.

After a rough start to the year the stock started to turn its fortunes, jumping by 10% in the final 3 months of the year. On average, investors can expect shares to jump 3% immediately through the print but then flattens out in the next 30 days. 

Last quarter Salesforce maintained its extended climb on sustained demand for new and pre existing cloud based products. Revenue jumped 25% on a 24% increase in subscription and support revenue as well as a nearly 40% rise in professional services and other sales. Along with robust report, management raised guidance for fiscal 2017. Revenue is projected to increase 25% to 26% in 2017 to the range of $8.37 to $8.38 billion.  

Salesforce failed to make a splashy acquisition in 2016 while Microsoft secured the coveted services of Linkedin. Investors believe that Salesforce will start to lose ground to Microsoft as it integrates the professional network into its namesake CRM products. But often times analysts fail to acknowledge that Salesforce’s other acquisitions have been largely successful in recent years.  Considering adoption rates and demand aren’t having a detrimental impact on financial performance, Salesforce growth strategy seems to be working effectively

On the other hand, increased competition and weak currency translation remain near term headwinds that potentially negatively impact earnings growth. Oracle and now Microsoft could potentially hamper long term prospects if its native products gain traction. Currency fluctuations, as its does with other multinationals, takes toll on international operations and sales growth. 

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