CRM platform provider
) is set to report second-quarter fiscal 2015 results on Aug 21.
Last quarter, the company posted a negative earnings surprise of
170.0%. It is also worth noting that Salesforce has underperformed
the Zacks Consensus Estimate in all the four preceding quarters
with a negative earnings surprise average of 133.13%.
Let us see how things are shaping up for this announcement.
Factors this Past Quarter
Although Salesforce reported a loss in the last reported quarter
(1Q15), its revenues increased year over year primarily due to
growth across all its business segments and Salesforce ExactTarget
Marketing Cloud platform. Moreover, Salesforce raised the fiscal
The rising number of deal wins at Salesforce and the rapid
adoption of its cloud-based solutions remain the growth catalysts.
Overall, the company's diverse cloud offerings and strong spending
on digital marketing are the positives. Moreover, the company's
strategic acquisitions and the resultant synergies are expected to
remain the long-term positives.
Moreover, Salesforce had earlier outlined its plans to expand in
the European counties by opening data centers in the U.K., France
and Germany by 2015. The opening of these data centers will help
Salesforce tap local small and medium businesses as well as
While these investments are necessary for long-term growth,
margins will remain under pressure over the next few quarters, in
Although the company is growing reasonably in the cloud market,
growth prospects are tempered by competition from the likes of
International Business Machines (
), Oracle Corp. and SAP AG.
Our proven model does not conclusively show that Salesforce will
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Both the Most Accurate estimate and the Zacks Consensus Estimate
stand at a loss of 1 cents. Hence, the difference is 0.00%.
Salesforce's Zacks Rank #3 (Hold) when combined with a 0.00% ESP
makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies, which you may consider as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
Nimble Storage, Inc. (
), with an Earnings ESP of +25.00% and a Zacks Rank #3.
GameStop Corp. (
), with an Earnings ESP of +10.53% and a Zacks Rank #3.
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