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Here's What to Expect from Salesforce (CRM) Q3 Earnings

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Shares of Salesforce (CRM - Free Report) surged 3.6% Monday as part of a larger market turnaround that saw fellow tech powers such as Amazon (AMZN - Free Report) and Nvidia (NVDA - Free Report) jump. The question now is does this mean that investors expect strong Q3 financial results from the cloud-based customer relationship management company Tuesday? Let’s take a look to find out.

Overview

Salesforce, which has over 150,000 business clients, is one of the biggest customer relationship management companies in the world. The firm offers its customers a wide range of services—sales, marketing, e-commerce, etc.—that might otherwise require significant technological infrastructure and maintenance.   

The San Francisco-based firm also has Microsoft (MSFT - Free Report) Office-like products designed for the cloud to help it compete against not only MSFT but also Google (GOOGL - Free Report) . Plus, Salesforce and its peers like Adobe (ADBE - Free Report) , Oracle (ORCL - Free Report) , and VMware (VMW - Free Report) could expand as more businesses dive deeper into the digital age.

 

Q3 Outlook

Salesforce’s Q3 revenues are projected to jump 25.6% to reach $3.37 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s subscription and support sales are projected to jump roughly 26% from $2.49 billion to hit $3.14 billion, based on our NFM estimates.

At the bottom end of the income statement, Salesforce’s adjusted quarterly earnings are projected to surge 28.2% to touch $0.50 per share. Yet, we still need to know how likely it is that Salesforce can top its quarterly earnings estimates since a beat could help drive CRM stock upward, at least in the near-term. Luckily, we can turn to our exclusive Earnings ESP figure to do so.

The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Salesforce is currently a Zacks Rank #3 (Hold) that sports an Earnings ESP of 0.00%. CRM also hasn’t seen any earnings estimate revisions within the last 60 days. Unfortunately, this means our model is inconclusive. But we should note that Salesforce topped our quarterly earnings estimates in the trailing four quarters, including big beats in the first two quarters of this year.

Salesforce is scheduled to report its Q3 fiscal 2019 financial results after the market closes on Tuesday. CRM stock closed regular trading Monday at $126.41 per share, which marked a roughly 21% downturn from its 52-week high of $161.19.

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