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Analyst Blog

salesforce.com, Inc. (CRM - Free Report) is set to report third-quarter fiscal 2017 results on Nov 17. Last quarter, the company posted a positive earnings surprise of 40%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Last quarter, Salesforce witnessed significant year-over-year growth in both the top and the bottom line. The improvement has been primarily attributed to the rapid adoption of the company’s cloud-based solutions. Also, higher demand for Salesforce ExactTarget Marketing Cloud platform, part of the Salesforce1 Customer Platform, contributed to the improvement. We expect the trend to continue in the third quarter as well.

A higher number of deal wins and geographical contributions should also boost results in the to-be-reported quarter. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain growth catalysts. Moreover, strategic acquisitions and resultant synergies are expected to drive long-term growth.

Considering increased customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of the company’s platforms indicates solid growth opportunities in the expanding cloud computing space, which will, in turn, boost results in the to-be reported quarter.

On the flip side, although the company is growing reasonably in the cloud market, growth prospects have been rationalized to a considerable extent due to intensifying competition from Microsoft (MSFT - Free Report) Oracle Corp. and SAP AG. Moreover, currency fluctuations and stepped-up investments in international expansion and data centers could hurt fiscal third-quarter results.

Earnings Whispers

Our proven model does not conclusively show that Salesforce will 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 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%. This is because the Most Accurate estimate of 3 cents is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Salesforce’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

SALESFORCE.COM Price and EPS Surprise

SALESFORCE.COM Price and EPS Surprise | SALESFORCE.COM Quote

Stocks to Consider

Here are a couple of stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Marvell Technology Group Ltd. (MRVL - Free Report) , with an Earnings ESP of +40.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Ltd. (AVGO - Free Report) , with an Earnings ESP of +1.74% and a Zacks Rank #3.

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