SAP SAP SE

SAP

Guidance Rises Despite Drop in Net

FRANKFURT -- SAP SE on Friday raised its guidance for 2016, even after it reported a 19% slide in net profit for the third quarter.

The German business-software provider said it now expects full-year operating profit to be in a range of EUR6.5 billion to EUR6.7 billion ($7.1 billion to $7.3 billion), compared with EUR6.35 billion in 2015. That estimate, based on calculations not recognized under international financial-reporting standards, is up from a previous forecast of EUR6.4 billion to EUR6.7 billion.

SAP said it also now expects non-IFRS cloud subscription and support revenue to be in a range of EUR3 billion to EUR3.05 billion, compared with EUR2.3 billion in 2015, in the latest sign of Chief Executive Bill McDermott's efforts to center the company around internet cloud-based software.

Net profit for the period ended Sept. 30 was EUR730 million, compared with EUR898 million during the same period a year prior, weighed down by higher share-based compensation expenses.

"This is a perfect reflection of how the share price has increased for shareholders," Mr. McDermott said of the in an interview Friday of the nearly EUR300 million in compensation expenses. "We have a very happy company today," he added.

SAP's share price has risen almost 20% over the past year, closing at EUR79.31 on Oct 20.

Mr. McDermott said capital markets had started to value the company as a leading cloud player, rather than just an on-premise software company.

"Investors have said these guys are doing what they said they would do, and there has been a consistent growth trajectory in the cloud," he said.

SAP performed "quite well in terms of profitability and growth" in the third quarter and is on a "good course" to continue growing, according to Harald Schnitzer, an analyst at Germany's DZ Bank.

Revenue increased 8% to EUR5.38 billion, driven by a solid uptake of the company's cloud-based offerings. Cloud subscriptions and support revenue climbed 28%, to EUR769 million. But the company's traditionally core on-premise software licenses also continued to grow, with licensing and support revenue rising 5%, to EUR3.67 billion.

"We kept our core business strong and still got a really strong cloud number," Chief Executive Bill McDermott said.

--Christopher Alessi

HONEYWELL INTERNATIONAL

Weak September Depresses Profit

Honeywell International Inc. issued the downbeat earnings report it had forecast earlier this month, saying an unexpectedly weak September and lackluster performance in the aerospace segment hurt profit.

Honeywell shares had dropped 7.5% On Oct. 7,after the company lowered its sales and profit outlooks and preannounced the third-quarter results.

Chief Executive Dave Cote told investors at the time that sales had "failed to materialize" in the third quarter. Friday, the company reported results largely in line with those forecasts.

For the year, Honeywell expects sales of $39.4 billion to $39.6 billion, with core organic sales, which exclude currency fluctuations and deals, falling between 1% and 2%. Analysts had expected $39.63 billion in sales.

During the quarter, the industrial conglomerate reported an overall profit of $1.24 billion, down from $1.26 billion. On a per-share basis, earnings were flat at $1.60. When excluding restructuring and other costs, earnings per share for the quarter were $1.67.

Revenue grew 2% to $9.8 billion as core organic sales fell 3%.

Analysts polled by Thomson Reuters had expected earnings per share of $1.60 on $9.79 billion in sales.

In the company's aerospace segment, organic revenue and unadjusted revenue fell about 6% due to the impact of sales incentives, lower volumes in business and aviation, weakness in commercial helicopters and the completion of space and international defense programs.

For the fourth quarter, Honeywell expects aerospace sales to fall 7% to 9% due to weakness in the business jets, defense and space areas.

Revenue in its safety and productivity solutions unit fell 2.2%. Core sales dropped 8% due to lower volume associated with a completed U.S. Postal Service contract and lower volumes in its safety business.

Revenue in its performance materials and technologies unit grew 2.2% as core sales declined 3% due to declines in gas processing, licensing and engineering. During this quarter, the company expects sales to fall 4% to 5% while core sales are expected to increase 2% to 4% on stabilizing oil prices.

In its home and building technologies unit sales increased 17% and 5% on a core-organic basis due to positive results in the distribution and business solutions unit and growth in environmental and energy solutions.

--Austen Hufford

(END) Dow Jones Newswires

October 24, 2016 02:48 ET (06:48 GMT)

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