We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
SAP SE (SAP): Will it Spring a Surprise in Q4 Earnings?
Read MoreHide Full Article
SAP SE (SAP - Free Report) is slated to report four-quarter and full-year 2016 results on Jan 24.
Last quarter, the company had posted its second consecutive earnings miss, as it lagged estimates by 13.9%. We find that the company’s earnings record has been unimpressive over the trailing four quarters, with three misses for just one beat. This has resulted in a negative average surprise of 1.8% for the observed period.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Looking at its recent history, we believe that SAP HANA (High-Performance Analytic Appliance), a class of business applications, will continue to act as the strongest top-line driver for the company’s fourth-quarter results. SAP Cloud, powered by HANA, is the only ‘real-time digital data offering’ which has gained huge popularity among client operations as it seamlessly modernizes their operations. During the last reported quarter, S/4HANA had gained 400 customers, of which 40% are entirely new. This hugely fueled the company’s revenues.
Moreover, SAP’s periodic SAP HANA updates and launches reinforce our belief that these will act as a major growth catalyst. The introduction of better and improved SAP HANA 2.0; SAP HANA express edition (downloadable version of its in-memory platform) and latest version of its data maintenance software – SAP Master Data Governance are likely to be conducive to its fourth-quarter sales performance.
Some of the other notable growth drivers of the company include its wide business network, managed through three players – Ariba, Fieldglass and Concur – and its robust portfolio of human capital management (‘HCM’) applications. Also, Customer Engagement and Commerce solutions (CEC) of SAP has been witnessing an impressive traction and is expected to boost fourth-quarter and full-year 2016 results.
In a nutshell, SAP’s cloud business, including cloud subscriptions & support revenues and software support, have been churning huge profits for the company, over the past few quarters. We perceive that solid performance of both traditional and cloud business will boost revenues for the quarter to be reported.
However, on the negative side, some of the company’s key end markets, including some Latin American countries and China, have been experiencing slowdown, adding to the company’s woes. Irregular client spending in the technology sector has persistently put pressure on the company’s top-line performance in the past and might play a spoilsport for the to-be-reported quarter as well.
Additionally, SAP operates in the highly competitive IT services industry, exposing the company to pricing risks. The cloud domain is characterized by sturdy competition from technology biggies like Microsoft, IBM and Amazon, increasing concerns for the company. Moreover, post the Brexit referendum, SAP believes erosion in business confidence, along with price increases, to hurt global IT spending. Such political tension also threatens the company’s financials for the fourth quarter and full-year 2016. Over the past six months, the stock has returned 6.7%, almost in line with the Zacks classified Computer-Software industry’s average of 6.3%.
Our proven model does not conclusively show that SAP is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or at least #3 (Hold), for this to happen. That is not the case here as you will see below.
Zacks ESP:Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.10.
Zacks Rank:SAP's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Microsoft Corporation (MSFT - Free Report) has an Earnings ESP of +1.3% and a Zacks Rank #2.
TE Connectivity Ltd. (TEL - Free Report) has an Earnings ESP of +1.0% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
SAP SE (SAP): Will it Spring a Surprise in Q4 Earnings?
SAP SE (SAP - Free Report) is slated to report four-quarter and full-year 2016 results on Jan 24.
Last quarter, the company had posted its second consecutive earnings miss, as it lagged estimates by 13.9%. We find that the company’s earnings record has been unimpressive over the trailing four quarters, with three misses for just one beat. This has resulted in a negative average surprise of 1.8% for the observed period.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Looking at its recent history, we believe that SAP HANA (High-Performance Analytic Appliance), a class of business applications, will continue to act as the strongest top-line driver for the company’s fourth-quarter results. SAP Cloud, powered by HANA, is the only ‘real-time digital data offering’ which has gained huge popularity among client operations as it seamlessly modernizes their operations. During the last reported quarter, S/4HANA had gained 400 customers, of which 40% are entirely new. This hugely fueled the company’s revenues.
Moreover, SAP’s periodic SAP HANA updates and launches reinforce our belief that these will act as a major growth catalyst. The introduction of better and improved SAP HANA 2.0; SAP HANA express edition (downloadable version of its in-memory platform) and latest version of its data maintenance software – SAP Master Data Governance are likely to be conducive to its fourth-quarter sales performance.
Some of the other notable growth drivers of the company include its wide business network, managed through three players – Ariba, Fieldglass and Concur – and its robust portfolio of human capital management (‘HCM’) applications. Also, Customer Engagement and Commerce solutions (CEC) of SAP has been witnessing an impressive traction and is expected to boost fourth-quarter and full-year 2016 results.
In a nutshell, SAP’s cloud business, including cloud subscriptions & support revenues and software support, have been churning huge profits for the company, over the past few quarters. We perceive that solid performance of both traditional and cloud business will boost revenues for the quarter to be reported.
However, on the negative side, some of the company’s key end markets, including some Latin American countries and China, have been experiencing slowdown, adding to the company’s woes. Irregular client spending in the technology sector has persistently put pressure on the company’s top-line performance in the past and might play a spoilsport for the to-be-reported quarter as well.
Additionally, SAP operates in the highly competitive IT services industry, exposing the company to pricing risks. The cloud domain is characterized by sturdy competition from technology biggies like Microsoft, IBM and Amazon, increasing concerns for the company. Moreover, post the Brexit referendum, SAP believes erosion in business confidence, along with price increases, to hurt global IT spending. Such political tension also threatens the company’s financials for the fourth quarter and full-year 2016. Over the past six months, the stock has returned 6.7%, almost in line with the Zacks classified Computer-Software industry’s average of 6.3%.
SAP SE Price and EPS Surprise
SAP SE Price and EPS Surprise | SAP SE Quote
Earnings Whispers
Our proven model does not conclusively show that SAP is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or at least #3 (Hold), for this to happen. That is not the case here as you will see below.
Zacks ESP:Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.10.
Zacks Rank:SAP's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Applied Materials, Inc. (AMAT - Free Report) has an Earnings ESP of +6.1% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Microsoft Corporation (MSFT - Free Report) has an Earnings ESP of +1.3% and a Zacks Rank #2.
TE Connectivity Ltd. (TEL - Free Report) has an Earnings ESP of +1.0% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>