Salesforce.com Earnings: What to Watch
February 28 2017 - 9:22AM
Dow Jones News
By Jay Greene
Salesforce.com Inc. is scheduled to report fiscal fourth-quarter
earnings after the market closes Tuesday. Here is what to
expect:
EARNINGS FORECAST: Analysts surveyed by Thomson Reuters expect
Salesforce to report adjusted earnings of 25 cents a share for the
quarter ended Jan. 31, up from 19 cents a year earlier. Adjusted
results exclude items such as amortization and stock-based
compensation.
REVENUE FORECAST: Analysts expect Salesforce to post revenue of
$2.28 billion, up from $1.81 billion a year ago.
WHAT TO WATCH:
SCATTERED CLOUDS: While still posting double-digit revenue
growth in its sales-force automation business in the fiscal third
quarter, the Sales Cloud category has become "more mature," Nomura
Securities Co. analyst Frederick Grieb wrote in a recent research
note. But Salesforce has used that business to cross-sell its other
web-based, on-demand computing services, such as its Service Cloud,
which helps companies run customer-service operations and Marketing
Cloud, used for email and advertising campaigns, Mr. Grieb noted.
In the fiscal third quarter, Service Cloud revenue grew 26% and
Marketing Cloud revenue gained 46%.
CURRENCY HEADWINDS: Like many tech companies with significant
international operations, Salesforce's results are hampered by the
strong U.S. dollar. Revenue in Europe, which accounted for 16% of
the company's sales in the third quarter, grew 11% in the period.
But in constant currency, a measurement used to eliminate the
effects of exchange-rate fluctuations, the growth was 27%. In a
conference call with analysts after last quarter, Salesforce
finance chief Mark Hawkins said he expected $100 million to $150
million of foreign- exchange headwind this fiscal year.
ACTIVIST INVESTORS: Recent securities filings showed that three
hedge funds, known for sometimes taking on activist roles,
accumulated Salesforce shares. The funds -- Corvex Management, Jana
Partners and Sachem Head -- have amassed 8.75 million shares among
them, but they haven't disclosed their intent. But Salesforce faced
some investor concern when it considered acquiring Twitter Inc.
last year, a bid it ultimately decided not to pursue. UBS Group AG
analyst John Byun wrote in a recent research note that the activist
stakes "could lead to a greater focus on improving relatively low
operating margins -- a frequent bear argument."
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
February 28, 2017 09:07 ET (14:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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