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.
Salesforce.com (CRM) Up 5.4% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Salesforce.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Beat on Q3 Earnings, Raised Guidance
Salesforce reported better-than-expected third-quarter results and raised guidance for the full fiscal 2024.
The enterprise cloud computing solution provider’s third-quarter non-GAAP earnings increased 51% to $2.11 per share from $1.40 reported in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.06. The robust year-over-year bottom line was mainly driven by higher sales and the benefits of ongoing cost-restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.
Salesforce’s quarterly revenues of $8.72 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.71 billion. The top line also improved 10% in constant currency.
Salesforce has been benefiting from the resilient demand for its cloud and business software offerings in an uncertain macroeconomic environment as customers are continuing with their major digital transformation. The strong third-quarter top-line performance also reflects the benefits of its go-to-market strategy and sustained focus on customer success.
Additionally, the company’s initiative to integrate artificial intelligence into its offerings, like Slack and the launch of a generative AI-enabled Einstein GPT product, also boosted the demand for its solutions during the reported quarter.
Quarterly Details
Coming to CRM’s business segments, revenues from Subscription and Support (93% of the total revenues) increased 12.6% from the year-earlier period to $8.14 billion. However, Professional Services and Other (7% of the total sales) revenues decreased 4.1% to $579 million. Our third-quarter revenue estimates for the Subscription and Support and Professional Services segments were pegged at $8 billion and $701.8 million, respectively.
Under the Subscription and Support segment, Sales Cloud revenues grew 11% year over year to $1.91 billion. Revenues from Service Cloud also improved 12% to $2.07 billion.
Marketing & Commerce Cloud revenues jumped 9% to $1.23 billion. Salesforce Platform and Other revenues were up 11% to $1.69 billion. Also, revenues from Data increased 22% year over year to $1.25 billion.
Our estimates for Sales, Service, Market & Commerce, Platform & Other, and Data Cloud services third-quarter revenues were pegged at $1.86 billion, $2.01 billion, $1.24 billion, $1.7 billion and $1.19 billion, respectively.
Geographically, Salesforce registered revenue growth of 9% in America (67% of the total revenues), 18% in the Asia Pacific (10%) and 14% in the EMEA (23%) on a year-over-year basis.
Salesforce’s gross profit came in at $6.57 billion, up 14% from the prior-year period. Moreover, the gross margin improved 200 basis points (bps) to 75.3%.
Salesforce recorded a non-GAAP operating income of $2.72 billion, highlighting an increase of approximately 53% from the year-ago quarter’s level of $1.78 billion. Moreover, the non-GAAP operating margin expanded 850 bps to 31.2% from 22.7% in the year-ago quarter due to lower operating expenses as a percentage of total sales. Operating expenses as a percentage of revenues declined to 58% from 67% in the year-ago quarter.
Balance Sheet & Other Details
Salesforce exited the fiscal third quarter with cash, cash equivalents and marketable securities of $11.9 billion, down from the $12.4 billion recorded at the end of the previous quarter.
CRM generated operating cash flow of $1.53 billion and free cash flow of $1.37 billion in the third quarter. During the first nine months of fiscal 2024, the company generated operating and free cash flows of $6.83 billion and $6.24 billion, respectively.
As of Oct 31, 2023, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $23.9 billion, up 14% on a year-over-year basis. The company bought back shares worth $1.93 billion in the third quarter and $5.93 billion during the first nine months of fiscal 2024. With this buyback of shares, CRM now has approximately $6 billion remaining under its current authorization limit of $20 billion.
Strong Guidance for Q4 and FY24
Salesforce provided strong guidance for the fourth quarter and updated the outlook for fiscal 2024. For the fiscal fourth quarter, Salesforce projects total sales between $9.18 billion and $9.23 billion (midpoint $8.205 billion), indicating 10% year-over-year growth.
The company expects no impact on fourth-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $2.25-$2.26 for the current quarter.
For fiscal 2024, Salesforce narrowed the revenue guidance range to $34.75-$34.8 billion from the previous forecast in the band of $34.7-$34.8 billion. The company expects foreign currency exchange rates to negatively impact its fiscal 2024 revenues by $50 million.
Salesforce raised the fiscal 2024 non-GAAP earnings forecast to $8.18 and $8.19 per share instead of the $8.04-$8.06 per share band anticipated earlier. The company raised its fiscal 2024 estimates for the non-GAAP operating margin to approximately 30.5% from 30% expected previously. Moreover, it now anticipates operating cash flow to increase 30-33% year over year in fiscal 2024, up from the earlier projection of 22-23% growth.
Salesforce’s upbeat guidance for fiscal 2024 reflects the benefits of the company’s recent price hike and the resilient demand for its solutions despite the challenging macroeconomic environment. In July 2023, CRM announced a price hike across its core products — Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau — by an average of 9%, effective from August 2023.
The hike marked Salesforce’s first product price increase in the last seven years. The company stated that it invested more than $20 billion in the last seven years in research and development to deliver 22 new releases and add thousands of new features, including the recent generative artificial intelligence, to its software.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 6.68% due to these changes.
VGM Scores
At this time, Salesforce.com has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Salesforce.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com belongs to the Zacks Computer - Software industry. Another stock from the same industry, Intuit (INTU - Free Report) , has gained 9.9% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Intuit reported revenues of $2.98 billion in the last reported quarter, representing a year-over-year change of +14.7%. EPS of $2.47 for the same period compares with $1.66 a year ago.
Intuit is expected to post earnings of $2.29 per share for the current quarter, representing a year-over-year change of +4.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Intuit. Also, the stock has a VGM Score of D.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Salesforce.com (CRM) Up 5.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Salesforce.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Beat on Q3 Earnings, Raised Guidance
Salesforce reported better-than-expected third-quarter results and raised guidance for the full fiscal 2024.
The enterprise cloud computing solution provider’s third-quarter non-GAAP earnings increased 51% to $2.11 per share from $1.40 reported in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.06. The robust year-over-year bottom line was mainly driven by higher sales and the benefits of ongoing cost-restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.
Salesforce’s quarterly revenues of $8.72 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.71 billion. The top line also improved 10% in constant currency.
Salesforce has been benefiting from the resilient demand for its cloud and business software offerings in an uncertain macroeconomic environment as customers are continuing with their major digital transformation. The strong third-quarter top-line performance also reflects the benefits of its go-to-market strategy and sustained focus on customer success.
Additionally, the company’s initiative to integrate artificial intelligence into its offerings, like Slack and the launch of a generative AI-enabled Einstein GPT product, also boosted the demand for its solutions during the reported quarter.
Quarterly Details
Coming to CRM’s business segments, revenues from Subscription and Support (93% of the total revenues) increased 12.6% from the year-earlier period to $8.14 billion. However, Professional Services and Other (7% of the total sales) revenues decreased 4.1% to $579 million. Our third-quarter revenue estimates for the Subscription and Support and Professional Services segments were pegged at $8 billion and $701.8 million, respectively.
Under the Subscription and Support segment, Sales Cloud revenues grew 11% year over year to $1.91 billion. Revenues from Service Cloud also improved 12% to $2.07 billion.
Marketing & Commerce Cloud revenues jumped 9% to $1.23 billion. Salesforce Platform and Other revenues were up 11% to $1.69 billion. Also, revenues from Data increased 22% year over year to $1.25 billion.
Our estimates for Sales, Service, Market & Commerce, Platform & Other, and Data Cloud services third-quarter revenues were pegged at $1.86 billion, $2.01 billion, $1.24 billion, $1.7 billion and $1.19 billion, respectively.
Geographically, Salesforce registered revenue growth of 9% in America (67% of the total revenues), 18% in the Asia Pacific (10%) and 14% in the EMEA (23%) on a year-over-year basis.
Salesforce’s gross profit came in at $6.57 billion, up 14% from the prior-year period. Moreover, the gross margin improved 200 basis points (bps) to 75.3%.
Salesforce recorded a non-GAAP operating income of $2.72 billion, highlighting an increase of approximately 53% from the year-ago quarter’s level of $1.78 billion. Moreover, the non-GAAP operating margin expanded 850 bps to 31.2% from 22.7% in the year-ago quarter due to lower operating expenses as a percentage of total sales. Operating expenses as a percentage of revenues declined to 58% from 67% in the year-ago quarter.
Balance Sheet & Other Details
Salesforce exited the fiscal third quarter with cash, cash equivalents and marketable securities of $11.9 billion, down from the $12.4 billion recorded at the end of the previous quarter.
CRM generated operating cash flow of $1.53 billion and free cash flow of $1.37 billion in the third quarter. During the first nine months of fiscal 2024, the company generated operating and free cash flows of $6.83 billion and $6.24 billion, respectively.
As of Oct 31, 2023, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $23.9 billion, up 14% on a year-over-year basis. The company bought back shares worth $1.93 billion in the third quarter and $5.93 billion during the first nine months of fiscal 2024. With this buyback of shares, CRM now has approximately $6 billion remaining under its current authorization limit of $20 billion.
Strong Guidance for Q4 and FY24
Salesforce provided strong guidance for the fourth quarter and updated the outlook for fiscal 2024. For the fiscal fourth quarter, Salesforce projects total sales between $9.18 billion and $9.23 billion (midpoint $8.205 billion), indicating 10% year-over-year growth.
The company expects no impact on fourth-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $2.25-$2.26 for the current quarter.
For fiscal 2024, Salesforce narrowed the revenue guidance range to $34.75-$34.8 billion from the previous forecast in the band of $34.7-$34.8 billion. The company expects foreign currency exchange rates to negatively impact its fiscal 2024 revenues by $50 million.
Salesforce raised the fiscal 2024 non-GAAP earnings forecast to $8.18 and $8.19 per share instead of the $8.04-$8.06 per share band anticipated earlier. The company raised its fiscal 2024 estimates for the non-GAAP operating margin to approximately 30.5% from 30% expected previously. Moreover, it now anticipates operating cash flow to increase 30-33% year over year in fiscal 2024, up from the earlier projection of 22-23% growth.
Salesforce’s upbeat guidance for fiscal 2024 reflects the benefits of the company’s recent price hike and the resilient demand for its solutions despite the challenging macroeconomic environment. In July 2023, CRM announced a price hike across its core products — Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau — by an average of 9%, effective from August 2023.
The hike marked Salesforce’s first product price increase in the last seven years. The company stated that it invested more than $20 billion in the last seven years in research and development to deliver 22 new releases and add thousands of new features, including the recent generative artificial intelligence, to its software.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 6.68% due to these changes.
VGM Scores
At this time, Salesforce.com has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Salesforce.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com belongs to the Zacks Computer - Software industry. Another stock from the same industry, Intuit (INTU - Free Report) , has gained 9.9% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Intuit reported revenues of $2.98 billion in the last reported quarter, representing a year-over-year change of +14.7%. EPS of $2.47 for the same period compares with $1.66 a year ago.
Intuit is expected to post earnings of $2.29 per share for the current quarter, representing a year-over-year change of +4.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Intuit. Also, the stock has a VGM Score of D.