We expect salesforce.com Inc. (NYSE:CRM) to beat expectations when it reports second-quarter fiscal 2017 results on Aug 31, 2016.
Why a Likely Positive Surprise?
Our proven model shows that Salesforce is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (6 cents per share) and the Zacks Consensus Estimate (5 cents per share), stands at +20.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Salesforce’s Zacks Rank #3 and +20.00% ESP makes us very confident in looking for a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
The higher number of deal wins and geographical contributions act as a tailwind for the company. We consider the rapid adoption of Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain the catalysts. Moreover, strategic acquisitions and the resultant synergies are expected to benefit over the long run.
It is worth mentioning that recently Salesforce inked an agreement to buy data analytics startup, BeyondCore. The acquisition is anticipated to boost Salesforce’s Analytics Cloud division’s capabilities. The terms of the deal have not been disclosed yet, although it is said to close by the end of this year.
Acquisitions have always been one of Salesforce’s key growth strategies. Over the past few years, the company has acquired or partnered a number of companies. This year alone, the company has completed or is in the midst of as many as nine acquisition deals, which include the recently concluded Demandware buyout.
In view of increasing customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Broadcom Limited (NASDAQ:AVGO) with an Earnings ESP of +0.87% and a Zacks Rank #3
The Cooper Companies Inc. (NYSE:COO) with Earnings ESP of +0.44% and a Zacks Rank #3
Science Applications International Corporation (NYSE:SAIC) with an Earnings ESP of +1.27% and a Zacks Rank #3
SALESFORCE.COM (CRM): Free Stock Analysis Report
BROADCOM LTD (AVGO): Free Stock Analysis Report
COOPER COS (COO): Free Stock Analysis Report
SCIENCE APP INT (SAIC): Free Stock Analysis Report
Original post