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Buyouts & Partnerships to Aid Salesforce's (CRM) Q1 Earnings

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Salesforce.com Inc. (CRM - Free Report) is slated to release first-quarter fiscal 2019 results on May 29. The question lingering in investors’ minds is whether or not this customer-relationship management solution provider will be able to post a positive earnings surprise in the quarter.

Notably, Salesforce has delivered positive earnings surprises for eight straight quarters. Over the trailing four quarters, the company delivered an average positive surprise of 6.4%. So, let’s see how things are shaping up prior to this announcement.

What to Expect?

The Zacks Consensus Estimate for the quarter is pegged at 46 cents, reflecting a massive year-over-year increase of 64.3%. Furthermore, the Zacks Consensus Estimate for the fiscal first-quarter earnings has moved up over the past seven days. The Zacks Consensus Estimate for sales of $2.94 billion indicates around 23.2% growth from the prior-year quarter.

Salesforce.com Inc Price and EPS Surprise

Let’s see what’s driving this overwhelming expectation.

Partner Program Adding Customers

Stellar growth in Salesforce partner certifications has been fueling the company’s top-line results. Notably, the company’s partner certification has witnessed five-time growth over the past four years and more companies are willing to invest in Salesforce activities. Accenture (ACN - Free Report) has emerged as one of the biggest examples for this. Notably, Accenture is currently a global leader in the Salesforce implementation service space, with more than 11,000 skilled consultants.

Currently, a number of big organizations, including Dell, IBM, Amazon, and Google, are Salesforce’s partners. Analysts covering the stock anticipate the fiscal first quarter to have witnessed new partner additions, thereby bolstering this Zacks Rank #1 (Strong Buy) company’s top-line performance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acquisitions Driving Revenues

Acquisitions have always been one of Salesforce’s key growth strategies. Over the last two years, the company has closed as many as 16 acquisitions worth billions of dollars, including its biggest ever buyout — MuleSoft. These acquisitions have strengthened its position in the customer relationship-management solution-providing space. We expect the acquisition synergies to have bolstered Salesforce’s fiscal first-quarter top-line performance.

Partnerships Stoking International Growth

Salesforce still generates only about 30% of total revenues from international operations, which is lower than its rivals like Microsoft (MSFT - Free Report) or Oracle (ORCL - Free Report) composition of around 50%. Nonetheless, the company noted that its partnership agreements with the likes of Amazon and Alphabet for the firms’ cloud services have been helping it expand the company’s international operations.

Earlier, the company used to run its software at its own data centers which had been curbing its growth potentials. However, in 2016, the company decided to utilize the geographical reach of other data-center service providers in order to expand its international business.

The company’s first partnership in this space was with Amazon Web Services in 2016, followed by the next alliance with Alphabet last November. During fourth-quarter fiscal 2018, the company won several deals due to its international-expansion initiatives. Anticipations of the company winning more such deals will have bolstered its fiscal first-quarter top- and bottom-line results.

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