SAP Improves SuccessFactor Portfolio, Tough Times Ahead

In a bid to fortify its human capital management (‘HCM’) solutions, German software giant SAP SE (DE:SAPG) (NYSE:SAP) , has recently boosted its SAP SuccessFactors portfolio. The company announced “intelligent mentoring” which will now be part of SAP SuccessFactors Succession & Development solution and also launched a career site builder that will aid easy maintenance of responsive career sites.

Numbers Signals Bleak Times Ahead

Despite a string of launches to boost its business, SAP's shares have declined 3.9% over the past three months, in stark contrast to the Zacks categorized Computer Software industry which yielded an average positive return of 2.1%. In addition, the company has a dismal track record, having missed estimates thrice in the trailing four quarters with an average negative surprise of 1.8%.

Moreover, the company is faring poorly on the estimate revision front as analysts have become increasingly bearish on the stock over the past couple of months. With two downward revisions compared with no upward revision in the past two months, the Zacks Consensus Estimate for fiscal 2016 earnings has declined from $3.35 to $3.12 per share. Dull prospects of the global IT industry, as well as flat customer spending projections are largely attributable for this negative broker sentiment.

HCM Product Upgrades to Stoke Growth

Despite the macroeconomic sluggishness, SAP has been constantly making upgrades and pursuing diligent launches in its human resource solutions to expand its customer base. The latest “intelligent mentoring” feature, which has been added to the SAP SuccessFactors Succession & Development solution, will improve employee engagement and retention by eliminating the need for cumbersome administrative work.

SAP believes that the present mentoring programs offered by business enterprises lack accountability and tracking. The company’s latest mentoring program seeks to match mentors with appropriate skills with mentees to make the process more equitable and inclusive. In addition, the company’s latest career builder website will offer consumer-style website design and management for human resource and recruiting personnel.

As per Deloitte’s research, two-third of job seekers search for jobs on mobile devices, of which 40% apply through the same. SAP’s career builder will help recruiters address this market by creating mobile-friendly career sites with a content management system. It can eventually transform the talent acquisition process of business enterprises from simplifying the hiring process to sourcing candidates across the globe.

Encouragingly, SuccessFactors solutions have acted as one of the major profit churners for SAP over the past few quarters. SuccessFactors Employee Central, which forms the backbone of the company’s Human Capital Management offerings, surpassed the 1,350 customer mark in the third quarter.

These offerings have been increasingly helping clients manage both permanent and temporary workforce. We believe the Zacks Rank #3 (Hold) company’s dominant position among HCM peers, coupled with constant product upgrades, bode well for future growth.

Other Stocks to Consider

Some better-ranked stocks in the broader computer & technology sector, include Cirrus Logic Inc. (NASDAQ:CRUS) , Aspen Technology, Inc. (NASDAQ:AZPN) and Guidance Software, Inc. (NASDAQ:GUID) . While Cirrus Logic sports a Zacks Rank #1 (Strong Buy), Aspen Technology and Guidance Software carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cirrus Logic is a premier supplier of high performance analog circuits and advanced mixed-signal chip solutions. The company beat earnings estimates thrice in the trailing four quarters with an average beat of 53.7%.

Aspen Technology deals in process optimization software and services. It boasts a remarkable average surprise of 23.6% in the trailing four quarters, having surpassed estimates strongly in each of them.

Guidance Software, an industry leader in digital investigative solutions, also has an impressive earnings history. The company beaten estimates in all four trailing quarters with an average surprise of 18.6%.

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