SAP SE SAP is scheduled to report first-quarter 2015 results on Apr 21. Last quarter, the company’s adjusted earnings came in line with the Zacks Consensus Estimate. Encouragingly, SAP has a healthy trailing four-month earnings surprise of 13.20%. Let’s see how things are shaping up for this announcement.
Factors To Consider This Quarter
Over the past three months, the company has been making concerted efforts to improve its portfolio, and this is expected to significantly benefit its partners. The most noteworthy among them includes SAP S/4HANA, the business development software that will likely boost the company’s growth momentum, going forward.
Most of SAP’S recent offerings are directed toward development of Internet of Things (‘IoT’), which management believes will herald the fourth industrial revolution. Leveraging on an increasing demand for improved service quality and operational excellence, the company is keen on improving the experience of its large network of partners. SAP HANA is experiencing increasing adoption across a wide range of industries from telecommunication to retail and from finance to sports.
SAP has collaborated with multiple partners, namely GEA (largest supplier of food processing industry), Jasper (a software firm) and T-Systems (an information technology company) in order to provide improved IoT services for clients. These collaborations are expected to generate lucrative commercial opportunities.
SAP has also been working diligently to develop solutions for improving the use of predictive analytics, which analyzes complex data to decipher meaningful trends to aid in decision-making process. This will likely become the future of successful businesses. Moreover, the company’s solutions help clients manage their supply chain comprehensively, thereby making them more responsive toward customer demand. We believe that these impressive offerings are likely to attract more and more customers, going forward.
Earnings Whispers
Despite some strategic initiatives, our proven model does not conclusively show that SAP 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 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: SAP currently has a negative Earnings ESP because the Most Accurate estimate stands at 49 cents, while the Zacks Consensus Estimate is pegged higher at 53 cents. This equates to a difference of -7.55%.
Zacks Rank: SAP’s Zacks Rank #3 when combined with a negative ESP lowers the predictive power of ESP and makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Others Stock to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
AO Smith Corp. AOS, Earnings ESP of +1.64% and Zacks Rank #2.
Apple Inc. AAPL, Earnings ESP of +6.05% and Zacks Rank #2.
American Eagle Outfitters AEO, Earnings ESP of +18.18% and Zacks Rank #2.
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