) is set to report second-quarter 2014 results after the closing
bell on Aug 29. Last quarter, it posted a negative surprise of
600.0% with a trailing four-quarter average negative surprise of
244.4%. Let's see how things are shaping up for this
Factors to Consider this Past Quarter
Although Salesforce reported robust top-line growth in the
first quarter, higher operating expenses negatively impacted the
company's bottom line. However, the higher number of deal
wins was encouraging and so were the geographical contributions.
Overall, the company's diverse cloud offerings and a better
spending prospect projected by Gartner are encouraging.
Though the company is witnessing a rise in its expenses due to
increased investments to offer innovative and diverse cloud-based
offerings, we believe that these are essential for the company to
gain traction in the cloud market and compete with some of the
bellwethers in the cloud space.
Our proven model does not conclusively show that Salesforce
will beat earnings estimates this quarter. That is because a
stock needs to have both a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Negative Zacks ESP:
That is because the Most Accurate estimate stands at 5 cents loss
per share while the Zacks Consensus Estimate is at 4 cents loss
per share. That is a difference of -25.0%.
Zacks Rank #3 (Hold):
Salesforce has a Zacks Rank #3 (Hold). The Zacks Rank #3 (Hold)
when combined with a negative ESP makes surprise prediction
difficult. However, we caution against stocks with Zacks Ranks #4
and 5 (Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
Other Stocks to Consider
Investors can consider other stocks with a positive ESP and
), with Earnings ESP of +66.7% and Zacks Rank #1 (Strong Buy)
), with Earnings ESP of +1.9% and Zacks Rank #2 (Buy)
), with Earnings ESP of +11.1% and Zacks Rank #2 (Buy).
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