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Can SAP (SAP) Deliver Earnings Surprise This Season? - Analyst Blog

SAP SE ( SAP ) is set to report third-quarter 2014 results on Oct 20. Last quarter, the company posted a positive surprise of 14.77%. Let us see how things are shaping up for this announcement.

Factors Influencing This Quarter

SAP is a leading global, independent software vendor with its flagship ERP software based in Germany. The company's SAP HANA (High-Performance Analytic Appliance), launched in 2010, has been a significant growth driver for it. Lately, the company has been actively participating in mergers and collaborations to expand its product portfolio and gain market share.

Recently, SAP announced its collaboration with International Business Machines Corporation ( IBM ) for the development of cloud infrastructure services in order to enhance SAPA HANA further.

Earlier in the quarter, the company revealed that its subsidiary SAP America will be acquiring Concur Technologies, Inc. ( CNQR ), the leading integrated travel and expense-management provider for about $8.3 billion. One of the biggest deals in the software industry, this is likely to make SAP the second largest cloud company with extensive business networks across the globe. This apart, the combined resources are expected to generate annual transaction volumes of more than $600 billion.

However, despite the company's persistent efforts to drive growth and innovation, currency volatility and continuing weakness in its professional services business can prove to be headwinds, going forward. Also, the recent sluggishness in terms of industrial output and export in German economy, limits the visibility for the company.

Earnings Whispers?

Our proven model does not conclusively show that SAP is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for SAP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 94 cents.

Zacks Rank: SAP's Zacks Rank #4 (Sell) reduces the predictive power of ESP.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

Stock to Consider

Here is a company you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter:

Apple Inc. ( AAPL ), with an Earnings ESP of + 4.62% and a Zacks Rank #2 (Buy).

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INTL BUS MACH (IBM): Free Stock Analysis Report

SAP AG ADR (SAP): Free Stock Analysis Report

CONCUR TECH INC (CNQR): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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