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Factors Setting the Tone for SAP SE (SAP) in Q3 Earnings
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SAP SE (SAP - Free Report) is scheduled to report third-quarter 2018 results on Oct 18. Notably, the company has a mixed record of earnings surprises in the trailing four quarters, with an average beat of 5.6%.
The company reported second-quarter 2018 non-IFRS earnings of €0.98 ($1.17) per share, up 4.3% on a year-over-year basis. However, the bottom line fell short of the Zacks Consensus Estimate of $1.18 per share.
Total revenues, on non-IFRS basis, were €6.01 billion ($7.15 billion), up 4% year over year (up 10% at constant currency), exceeding the Zacks Consensus Estimate of $7.11 billion. A flourishing cloud business and strong growth of support revenues aided top-line growth in the last reported quarter.
What to Expect?
The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.26 per share, indicating an increase of 5.9% on a year-over-year basis. Revenues are estimated to be around $6.97 billion, indicating a rise of 6.1% from the year-ago quarter.
Let's see how things are shaping up for this announcement.
Factor Influencing Q3 Results
SAP’s Cloud and Software business have been consistent growth drivers for quite some time. In fact, Cloud and software business revenues came in at €5.25 billion in the second quarter, up 4% year over year driven by Cloud subscriptions & support revenues of €1.30 billion, which surged 40% from the year-ago quarter.
Further, the company’s human capital management (‘‘HCM’’) applications continue to boost the top line, including the likes of SuccessFactors and SAP Fieldglass.
SAP SuccessFactors Employee Central has recently been recognized as a leading solution to streamline talent management from the likes of Gartner, IDC and Forrester. In fact, around 2,600 customers with prominent names like BMW, Telecom Argentina and MG Motors India among others selected the solution in the last reported quarter.
Additionally, continued market traction of the SAP S/4HANA platform is proving to be a sturdy growth driver. During the last reported quarter, S/4HANA adoption surged 41% from the year-ago quarter to 8,900 customers.
This apart, SAP’s business networks (which it manages through three main players, namely Ariba, Fieldglass and Concur) increased 21% on a constant currency basis to €688 million in the second quarter.
SAP continues to enhance Ariba solution with new initiatives which are expected to bolster its adoption, in turn the company’s top-line. In the quarter under review, SAP Ariba announced new datacenter facilities in Saudi Arabia and United Arab Emirates to accelerate digital transformation for local businesses. SAP Ariba’s digital platform was selected by People’s Government of GanzhouNankang, Grupo Boticário and Burger King Restaurant, among others.
Recently, SAP and Adobe (ADBE - Free Report) entered into a partnership with Microsoft (MSFT - Free Report) on the tech giant’s Open Data Initiative. The alliance is anticipated to bolster SAP’s foothold in customer relationship management (“CRM”) market.
Meanwhile, there is an inherent seasonality in technology spending on part of clients, exposing the company’s sales to risks of quarterly fluctuations. Further, rising expenses to enhance product portfolio might limit margin expansion.
What the Zacks Model Unveils
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
SAP has a Zacks Rank #3 and an Earnings ESP of 0.00%. This makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stock to Consider
Here is a stock you may consider, as our proven model shows that it has the right combination of elements to post an earnings beat this quarter.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Factors Setting the Tone for SAP SE (SAP) in Q3 Earnings
SAP SE (SAP - Free Report) is scheduled to report third-quarter 2018 results on Oct 18. Notably, the company has a mixed record of earnings surprises in the trailing four quarters, with an average beat of 5.6%.
The company reported second-quarter 2018 non-IFRS earnings of €0.98 ($1.17) per share, up 4.3% on a year-over-year basis. However, the bottom line fell short of the Zacks Consensus Estimate of $1.18 per share.
Total revenues, on non-IFRS basis, were €6.01 billion ($7.15 billion), up 4% year over year (up 10% at constant currency), exceeding the Zacks Consensus Estimate of $7.11 billion. A flourishing cloud business and strong growth of support revenues aided top-line growth in the last reported quarter.
What to Expect?
The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.26 per share, indicating an increase of 5.9% on a year-over-year basis. Revenues are estimated to be around $6.97 billion, indicating a rise of 6.1% from the year-ago quarter.
Let's see how things are shaping up for this announcement.
Factor Influencing Q3 Results
SAP’s Cloud and Software business have been consistent growth drivers for quite some time. In fact, Cloud and software business revenues came in at €5.25 billion in the second quarter, up 4% year over year driven by Cloud subscriptions & support revenues of €1.30 billion, which surged 40% from the year-ago quarter.
Further, the company’s human capital management (‘‘HCM’’) applications continue to boost the top line, including the likes of SuccessFactors and SAP Fieldglass.
SAP SuccessFactors Employee Central has recently been recognized as a leading solution to streamline talent management from the likes of Gartner, IDC and Forrester. In fact, around 2,600 customers with prominent names like BMW, Telecom Argentina and MG Motors India among others selected the solution in the last reported quarter.
Additionally, continued market traction of the SAP S/4HANA platform is proving to be a sturdy growth driver. During the last reported quarter, S/4HANA adoption surged 41% from the year-ago quarter to 8,900 customers.
This apart, SAP’s business networks (which it manages through three main players, namely Ariba, Fieldglass and Concur) increased 21% on a constant currency basis to €688 million in the second quarter.
SAP continues to enhance Ariba solution with new initiatives which are expected to bolster its adoption, in turn the company’s top-line. In the quarter under review, SAP Ariba announced new datacenter facilities in Saudi Arabia and United Arab Emirates to accelerate digital transformation for local businesses. SAP Ariba’s digital platform was selected by People’s Government of GanzhouNankang, Grupo Boticário and Burger King Restaurant, among others.
Recently, SAP and Adobe (ADBE - Free Report) entered into a partnership with Microsoft (MSFT - Free Report) on the tech giant’s Open Data Initiative. The alliance is anticipated to bolster SAP’s foothold in customer relationship management (“CRM”) market.
Meanwhile, there is an inherent seasonality in technology spending on part of clients, exposing the company’s sales to risks of quarterly fluctuations. Further, rising expenses to enhance product portfolio might limit margin expansion.
What the Zacks Model Unveils
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
SAP SE Price and EPS Surprise
SAP SE Price and EPS Surprise | SAP SE Quote
SAP has a Zacks Rank #3 and an Earnings ESP of 0.00%. This makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stock to Consider
Here is a stock you may consider, as our proven model shows that it has the right combination of elements to post an earnings beat this quarter.
AB Volvo (VLVLY - Free Report) has an Earnings ESP of +4.23% and a Zacks Rank #1. The company is slated to report third quarter earnings on Oct 19. You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>