Salesforce.com Inc. (CRM) is set to report fourth-quarter 2014 results on Feb 27. Last quarter, it posted negative surprise of 200%. Let’s see how things are shaping up for this announcement.
Factors This Past Quarter
Salesforce.com reported mixed third-quarter 2014 results. Although loss per share was wider than the Zacks Consensus Estimate, the company’s revenues surpassed the consensus mark. Operating results were, however, impacted by higher costs.
We consider higher number of deal wins coupled with the rapid adoption of Salesforce1 Customer Platform to be the positives for Salesforce. The company’s diverse cloud offerings and new products are expected to aid top-line expansion. Moreover, the strategic acquisitions and the resultant synergies are expected to remain the long-term positives.
Although, the company is growing reasonably in the cloud market, growth prospects have been rationalized to a considerable extent by the renewed efforts of other tech giants, such as Oracle (ORCL) and SAP AG (SAP), in the cloud space.
Earnings Whispers?
Our proven model does not conclusively show that Salesforce is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 8 cents. Hence, the difference is of 0.00%.
Zacks Rank: Salesforce’s Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stock to Consider
Another stock, which as according to our model, has the right combination of elements and is expected to post an earnings beat this quarter is:
Baidu, Inc. (BIDU), an Earnings ESP of +4.23% and a Zacks Rank #1 (Strong Buy).
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