SAP Gains on Q2 Earnings, Guides up on Strength in SAP HANA - Analyst Blog

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Shares of SAP SE ( SAP ) gained 1.31% after the company reported second-quarter non-IFRS earnings per share of €0.79, an increase of 10% from €0.71 per share in the second quarter of 2013. In U.S. dollar terms, earnings came in at $1.08 handily surpassing the Zacks Consensus Estimate of 88 cents a share by 22.7%.

SAP's flagship innovation, SAP HANA and its broader market adaptation in the cloud has been a growth driver for the quarterly profits. The company now has over 3,600 SAP HANA customers and greater than 1,200 SAP HANA Business Suite customers.

Total revenue generated in the second quarter of 2014 was €4,153.0 million ($5,660.1 million), up 5% year over year at constant currency. However, the revenues fell short of the Zacks Consensus Estimate of $5,768 million.

Revenues by Segment

Cloud Subscriptions & Support : The segment garnered revenues of €242 million ($329.8 million) in the quarter, up a robust 39% year over year at constant currency.

Software & Support Revenues : The segment reported revenues of €3,238 million ($4,413.1 million), up 6% year over year at constant currency.

Software and Software-Related Service Revenues : This sub-segment includes Support, Subscription and other software-related services revenues. The segment reported revenues of €3,480 million ($4,742.9 million), up 8% year over year at constant currency.

Revenues by Region

The EMEA region reported a strong performance, in spite of uncertainties due to the ongoing Crimea crisis. The revenues from the non-IFRS software and software-related service rose 8% year over year at constant currencies, driven by 51% growth at constant currencies in non-IFRS cloud subscription and support revenue and strong software revenue growth in the UK and France.

The Americas region also reported a healthy performance in the second quarter of 2014 with 6% growth in non-IFRS software and software-related service revenue at constant currencies and 34% growth in non-IFRS cloud subscriptions and support revenue at constant currencies. In the North American region, SAP witnessed a fast transition to the cloud along with a strong software revenue performance from Canada. This apart, the company continues to witness strong demand in Latin America with growth opportunities across all markets.

SAP reported a strong performance in the APJ region. The company reported Non-IFRS Cloud subscriptions and support revenue growth of 48% at constant currencies. Additionally, Non-IFRS software and software-related service revenue also grew 12% at constant currencies. This apart, revenues from Australiaand Malaysia surged with triple-digit revenue growth in software at constant currencies.

Margins

For the second quarter of 2014, the company reported gross margin of 68.9%, a decline from 69.4% reported in the second quarter of 2013, while operating margin declined to 16.8% from 24.3% in the prior-year quarter.

Cash and Balance Sheet

The company's operating cash flow increased 4% year over year to €2.58 billion ($3.52 billion) for the six-months period ended Jun 30, 2014. Free cash flow rose 2% year over year to €2.27 billion ($3.09 billion) in the six month period.

As on Jun 30, 2014, SAP had total group liquidity (includes cash and cash equivalents and short term investments) of €3.18 billion ($4.33 billion) compared with €2.84 billion as on Dec 31, 2013. Net liquidity as on Jun 30, 2014 was -€1.06 billion (1.4 billion) compared with -€1.47 billion as on Dec 31, 2013.

Outlook

Concurrent with the earnings release, management updated its guidance for fiscal 2014.

The company now anticipates full-year 2014 non-IFRS cloud subscription and support revenues to be in the range of €1,000 - €1,050 million, up from the previously projected outlook of €950 to €1,000 million, at constant currencies. The upper end of this guidance reflects a growth rate of 39%.

The company re-affirmed full year 2014 IFRS software and software-related service revenues to increase by 6-8% at constant currency and full-year 2014 non-IFRS operating profit to fall in the band of €5.8 billion to €6.0 billion at constant currency.

Zacks Rank

SAP currently holds a Zacks Rank #4 (Sell). Better-ranked stocks in the sector include Aspen Technology, Inc. ( AZPN ), MicroStrategy Inc. ( MSTR ) and Pegasystems Inc. ( PEGA ). All three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: SAP , PEGA , AZPN , MSTR

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