SAP SE SAP came up with the preliminary results for third-quarter 2015, following an initial review of its performance. The company will report its full earnings results for the quarter on Oct 20.
SAP stated that its cloud business continued to perform strongly, even excluding the contribution from the acquired firm Concur Technologies. In the recently concluded quarter, the company’s non-IFRS cloud subscriptions and support revenues surged 116% on a year-over-year basis to €600 million ($670 million) aided by robust new cloud bookings.
On the other hand, the company’s flagship offering – S/4HANA – continues to go strong, driven by its increased adaptability and a broader range of available applications.
Snapshot of Results
As per the preliminary assessment, non-IFRS total revenues for the quarter came in at €4.99 billion ($5.55 billion), marking year-over-year growth of 17%. The Zacks Consensus Estimate for the quarterly revenues is pegged at $5.40 billion at present.
Apart from cloud subscriptions and support segment, SAP’s other businesses also performed well. Non-IFRS revenues from cloud and software segment witnessed growth of 19% year over year to €4.12 billion ($4.58 billion). On the other hand, software licenses and support segment’s non-IFRS revenues increased 11% year over year to €3.52 billion ($3.91 billion).
Also, the company’s non-IFRS operating profit for the quarter rose 19% year over year to €1.62 billion ($1.80 billion).
Guidance Reiterated
Based on rapid market traction of the cloud business, SAP has reiterated its 2015 outlook, with non-IFRS cloud subscriptions and support revenue in a range of €1.95–€2.05 billion in terms of constant currency. The company’s Concur and Fieldglass acquisition are expected to contribute 50% of this growth.
Also, SAP has not changed its projection range of 8–10% for cloud & software revenues on a constant currency basis in this year. Similarly, non-IFRS operating profit is also expected within the prior-year range of €5.6–€5.9 billion for 2015.
Our Take
SAP’s preliminary results look impressive. The company has established a strong dominance over three of the most critical client demand areas, namely efficient customer engagement, human capital management and interconnected commerce network that, in turn, drive its growth. With encouraging preliminary results, we believe this Zacks Rank #3 (Hold) stock could witness an upward rank revision in the near term.
Better-ranked stocks in the same industry include American Software, Inc. AMSWA, Majesco Entertainment Co. COOL and Dassault Systemes SA DASTY. All stocks sport a Zacks Rank #1 (Strong Buy).
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Note: 1 EUR = $ 1.1122 (period average from Jul 1, 2015 to Sep 30, 2015)
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