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salesforce (CRM) to Post Q1 Earnings: What's in the Cards?

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salesforce.com Inc. (CRM - Free Report) is slated to release first-quarter fiscal 2020 results on Jun 4.

Notably, the company delivered a positive surprise in all the trailing four quarters, the average being 35%.

In the last reported quarter, it came up with non-GAAP earnings of 70 cents per share, comprehensively exceeding the Zacks Consensus Estimate of 56 cents and also the year-ago quarter’s 47 cents.

Revenues of $3.60 billion increased 26% year over year and also surpassed the Zacks Consensus Estimate of $3.56 billion. Moreover, the top line improved 27% at constant currency (cc). Excluding the acquisition of Mulesoft, the same grew 20%. Notably, MuleSoft contributed $181 million to the metric in the fourth quarter.

What to Expect in Q1

For first-quarter fiscal 2020, revenues are projected between $3.67 billion and $3.68 billion. Non-GAAP earnings are expected in the range of 54-55 cents per share.

The Zacks Consensus Estimate for earnings in the quarter to be reported is pegged at 61 cents, implying a decline of 17.8% from the year-ago reported figure. The Zacks Consensus Estimate for sales of $3.68 billion indicates around 22.5% growth from the prior-year reported number.

salesforce.com, inc. Price and EPS Surprise

salesforce.com, inc. Price and EPS Surprise

salesforce.com, inc. price-eps-surprise | salesforce.com, inc. Quote

So, let’s see how things are shaping up prior to this announcement.

Factors at Play

salesforce’s first-quarter fiscal 2020 results are likely to benefit from its diverse cloud offerings, expanding partner base and a considerable spending on digital marketing. The company’s strategy of frequent product launches and cloud services is likely to boost its clientele, thereby driving top-line growth.

The company continues to win customers in the international market and has also strengthened its relationships with some of the leading companies in the world, which in turn, are aiding solid international growth. This is also likely to be reflected in the upcoming results.

salesforce’s consolidating relationships with cloud companies, namely Amazon (AMZN - Free Report) , Alphabet’s (GOOGL - Free Report) Google and International Business Machines (IBM - Free Report) among others are expected to be its key catalysts.

Additionally, salesforce’s acquisition strategy is helping it fortify its position in the customer relationship-management solution-providing space. Notably, MuleSoft’s merger with the company is a major positive.

However, seasonality in license component is anticipated to hit MuleSoft revenues, inducing a sequential decrease in the soon-to-be-reported quarter. Seasonality in Marketing Cloud is also a concern. Further, adverse foreign exchange volatility is a persistent overhang. Additionally, increasing expenses might keep margins under pressure.

salesforce currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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