Enterprise application software provider, SAP SE (SAP - Free Report) , recently announced that its business network, Ariba, has gained a new client in Australian paint maker DuluxGroup. Ariba has proved to be a source of robust profit churner for SAP, managing the business of 2.8-million clients who purchase or sell goods and services worth over $1 trillion.
Leveraging on SAP Ariba’s solutions for direct spend and Integrated Business Planning system, DuluxGroup aims to digitize its extended supply chain. Further, it will create a simple process for managing expenditure. Also, DuluxGroup can integrate its product design, R&D and manufacturing processes through SAP Ariba’s state-of-the-art solutions.
DuluxGroup is the latest to join the Ariba bandwagon, which includes some of the biggest companies of the world. In the last reported quarter, Ariba gained Green Cross, LATAM Airlines Group and Boticario Group as clients. Further, more than 3 million new subscribers in North America have implemented SAP Ariba’s guided buying capabilities.
During the second quarter of 2017, new cloud bookings – a key indicator of sales success in cloud business – were significantly up 33% to €340 million ($373.9 million) and Ariba was a chief contributor in this growth. Going forward, SAP remains bullish that growing demand for simplified and automated business-to-business commerce solutions will fuel the growth of Ariba. SAP’s shares have returned 12.9% over the past six months, in line with the industry’s average return.
Despite healthy growth drivers in place, the Zacks Rank #4 (Sell) company faces stiff competition from industry frontrunners including Computer Sciences Corporation and International Business Machines Corporation (IBM - Free Report) . Also, there is an inherent seasonality in technology spending on part of clients, which exposes the company’s sales to risks of quarterly fluctuations. SAP has been witnessing an increase in operating profit and rise in operational expenses over the past few quarters, which are expected to put pressure on margins.
Stocks to Consider
A few better-ranked stocks in the industry include Applied Optoelectronics, Inc. (AAOI - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), Motorola Solutions carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Optoelectronics delivered an average positive earnings surprise of 21.0% in the trailing four quarters, beating estimates all through.
Motorola Solutions delivered an average positive earnings surprise of 14.5% for the last four quarters, having beaten estimates all through.
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