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salesforce (CRM) to Post Q3 Earnings: Is a Beat in Store?

Zacks Equity Research

salesforce.com Inc. CRM is slated to release third-quarter fiscal 2020 results on Dec 3.

For the fiscal third quarter, revenues are guided between $4.44 billion and $34.45 billion. The Zacks Consensus Estimate for sales of $4.44 billion indicates 30.8% growth from the prior-year reported number.

Non-GAAP earnings per share are estimated in the band of 65-66 cents. The Zacks Consensus Estimate for earnings is pegged at 66 cents, implying 8.2% growth from the year-ago reported figure.

The company delivered a positive surprise in all the trailing four quarters, the average being 34.97%.

In the last reported quarter, the company came up with non-GAAP earnings of 66 cents per share, which beat the Zacks Consensus Estimate of 47 cents. However, the bottom line declined from the year-ago quarter’s 71 cents.

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Revenues of $4.03 billion increased 22% year over year and also surpassed the Zacks Consensus Estimate of $3.95 billion. Moreover, the top line improved 24% in constant currency (cc).

salesforce.com, inc. Price and EPS Surprise

salesforce.com, inc. Price and EPS Surprise
salesforce.com, inc. Price and EPS Surprise

salesforce.com, inc. price-eps-surprise | salesforce.com, inc. Quote

So, let’s see how things are shaping up for this announcement.

Factors at Play

salesforce’s to-be-reported results are likely to benefit from the rapid adoption of its cloud-based solutions. Robust demand environment, driven by major digital transformation of customers is also a tailwind.

salesforce’s strong product portfolio is expected to have fueled robust growth in Subscription and Support revenues, constituting bulk of its revenues.

The company’s focus on building Customer 360 platform, both organically and through acquisitions, might have been a steady key driver. Salesforce Einstein in Customer 360 is also boosting customer experience. The addition of AI capabilities like Einstein Translation, Einstein Vision and Einstein Voice to all salesforce applications is a positive too.

Further, the company’s initiative in extending the power of Customer 360 with new services like Salesforce Blockchain and Salesforce Maps is an uptrend. Growing uptake of its free online digital learning platform Trailhead is an upside as well.

Additionally, the company is expected to have consistently benefited from its strategic acquisitions, namely Tableau and Salesforce.org, which might have contributed approximately $300 million and $75 million, respectively, to revenues this earnings season.

The company’s performance might also reflect its solid partner ecosystem. Moreover, salesforce’s new partnership with Alibaba makes us optimistic.

However, stiff competition from Oracle and Microsoft is a concern. Besides, persistence of unfavorable currency fluctuations is a key headwind. Besides, increasing investments in international expansions and data centers might have been an overhang on profitability.

What Our Model Says

The proven Zacks model predicts an earnings beat for salesforce this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

salesforce’s Zacks Rank #3 and an Earnings ESP of +4.97% make us upbeat this earnings season.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Canadian Imperial Bank of Commerce CM has an Earnings ESP of +0.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +0.65% and a Zacks Rank of 2.

CarMax, Inc. KMX has an Earnings ESP of +0.50% and is Zacks #2 Ranked.

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CarMax, Inc. (KMX) : Free Stock Analysis Report
 
Canadian Imperial Bank of Commerce (CM) : Free Stock Analysis Report
 
salesforce.com, inc. (CRM) : Free Stock Analysis Report
 
Dollar General Corporation (DG) : Free Stock Analysis Report
 
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Zacks Investment Research