SAP Beats 4Q Estimates

SAP (SAP - Analyst Report) reported fourth quarter and full year 2012 results. Earnings per share for the quarter were €1.14 ($1.47), up 7.0% year over year and 16.7% above the Zacks Consensus Estimate of $1.26 a share. Profits during the quarter were driven by delivering specific industry solutions strategic investments in its flagship innovation SAP HANA.

SAP also has one of the best cloud portfolios for its clients in the industry. Total revenue was €5.0 billion ($6.51 billion) in the fourth quarter of 2012, up 11% year over year on constant currency.

Revenue by Segment

Software & Could Subscriptions Revenue (41.4% of 4Q12 revenue): This segment includes Software and Maintenance revenue. The segment revenue in the quarter was €1.93 billion ($2.5 billion), up 8% year over year in constant currency.

Support Revenue (42.9% of 4Q12 revenue):The segment reported revenue of €2.1 billion ($2.7 billion), up 10% year over year (on constant currency basis).

Software and Software-Related Service Revenue (84.3% of 4Q12 revenue): This sub-segment includes Support, Subscription, and other software-related services revenue. Revenues in this segment grew 14.6% year over year to €4.2 billion ($5.5 billion).

Some of the leading clients of SAP include American Express Company (AXP - Analyst Report) and Nike Inc. (NKE - Analyst Report).

Revenue by Region

During the fourth quarter of 2012, revenue from the EMEA grew 5.9% year over year to €2.36 billion ($3.1 billion). EMEA software revenue increased 8.4% and the emerging markets such as Middle East and Africa performed well. In the EMEA, companies in the German banking industry such as Deutsche Bank AG (DB - Snapshot Report).

The Americas grew 15.5% year over year during the reported quarter, driven by a 37% growth in software. This robust growth was driven by the company’s partnership with the NFL. The NFL looks forward to SAP's cloud-based applications and analytical solutions to transform its fantasy football platform. In addition, Latin America also reported strong growth on the back of robust performances in Brazil and Mexico.

APJ expanded 15.6%, driven by a 21.7% improvement in software, attributable to growth in two of the largest economies in the region, namely, Japan and China. SAP’s Industrial Solutions business is a strong driver for growth in China.

Cash and Balance Sheet

Operating profit, representing 38.8% of revenue, grew 9% year over year to €1.96 billion in the quarter.

Exiting the year, the company had an operating cash flow of €3.65 billion, declining 3% year over year, due to increased working capital requirements. Cash and cash equivalents was down 50% year over year.

Outlook

Concurrent with the earnings release, management provided guidance full year 2013.

The company expects full year 2013 software & cloud subscriptions revenue to increase in the range of 14% – 20% at constant currencies. The full year 2013 cloud subscription and support revenue is expected to be around €750 million at constant currencies.

The company expects full-year 2013 non-IFRS software and software-related service revenue to increase in the range of 11% – 13% at constant currencies. While, operating profit for the full year is expected to be in a range of €5.85 billion to €5.95 billion at constant currencies

Although SAP has a Zacks Rank #3 (Hold), its competitors like BMC Software Inc. (BMC - Analyst Report), Compuware Corp. (CPWR - Analyst Report), GSE Systems Inc. (GVP - Snapshot Report) and SYMANTEC CORP. (SYMC - Analyst Report) all have a Zacks Rank of #1.