SAP SE (SAP) recently disclosed its preliminary results for fourth-quarter as well as full-year 2014. Following the news, the company’s shares gained over 4.1% in yesterday’s trading session, eventually closing at $67.70.
SAP affirmed that its cloud business has been gaining strength in 2014. Specifically, the acquisition of Concur Technologies has been proving to be significantly beneficial for the company. In the quarter, the company’s non-IFRS calculated cloud billings surged 115% indicating a healthy demand for its offerings.
On the other hand, the company’s innovative platform – SAP HANA – continues to go strong, driven by its increased adaptability and a broader range of available applications.
Snapshot of Results
As per preliminary results, non-IFRS revenues for the quarter came in at €5.47 billion ($6.94 billion), marking year-over-year growth of 4% on a constant currency basis. For full-year 2014, the same increased 5% year over year to €17.58 billion ($22.30 billion). The Zacks Consensus Estimate for quarterly revenues is pegged at $6.85 billion at present.
The company’s non-IFRS operating profit for the quarter declined 2% at constant currencies to €2.13 billion ($2.7 billion). However, the same increased 3% for full-year 2014 to €5.63 billion ($7.14 billion), while also meeting the company’s guidance of €5.6–€5.8 billion at constant currencies.
Segment Details
For the fourth quarter, the company’s non-IFRS revenues from cloud subscriptions and support marked growth of 59% year over year at constant currencies to €0.36 billion ($0.46 billion). SAP’s software and software-related service segment’s non-IFRS revenues witnessed growth of 5% year over year at constant currencies to €4.73 billion ($6 million). Software and support segment’s non-IFRS revenues increased 2% year over year to €4.37 billion ($5.54 billion) on a constant currency basis.
SAP’s full-year 2014 non-IFRS cloud subscriptions and support revenues were €1.10 billion ($1.4 billion), growing 45% year over year at the constant currency. SAP’s software and software-related service revenues were also impressive in spite of declining upfront sales. The segment reported 7% year over year non-IFRS revenue growth at constant currencies to €14.87 billion ($18.86 million). The company achieved its guidance for both these segments. Software and support segment’s non-IFRS revenues also reported a robust increase of 5% year over year to €13.77 billion ($17.47 million) at constant currencies.
In Conclusion
The company’s preliminary results look impressive. Moreover, having delivered positive earnings surprises in all of the four trailing quarters, the company is expected to beat earnings this quarter too. SAP is slated to report fourth-quarter and full-year 2014 results on Jan 20, 2015.
Though SAP currently carries a Zacks Rank #4 (Sell), we believe that with encouraging preliminary results an upward rank revision might be in the cards. Some better-ranked stocks in the industry include Imperva Inc. (IMPV), Nuance Communications, Inc. (NUAN) and Adobe Systems Incorporated (ADBE). While Imperva and Nuance Communications both sport a Zacks Rank #1 (Strong Buy), Adobe Systems carries a Zacks Rank #2 (Buy).
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