Salesforce.com Inc. (CRM) is scheduled to announce its second quarter fiscal 2012 results on August 18, 2011, and we see the analysts sticking to their prior estimates.
First Quarter Overview
Salesforce.com delivered decent first quarter 2012 results, beating the Zacks Consensus Estimate marginally on both the top and bottom lines. The quarter’s adjusted earnings came in at 6 cents per share, a penny ahead of our expectation.
Salesforce.com reported revenue of $504.4 million, which increased 33.9% from the year-ago quarter on robust demand for its products and broad-based revenue strength across all regions. As many as 5,400 paying customers were added during the quarter.
The year-over-year gross margin comparison suffered due to higher investments in its U.S. data centers and costs required to build the Japan data center. Operating margin was also adversely affected by higher operating expenses, which was due to increased research and development investments to maintain the company’s technology leadership. Increased headcount also added to costs.
Guidance
Salesforce.com has provided guidance for the second quarter and for fiscal 2012. For the second quarter of 2012, total revenue is expected in the range of $526.0 million to $528.0 million. GAAP loss per share is expected at between 1 cent and break-even, while non-GAAP diluted earnings per share are expected in the range of 29 cents to 30 cents.
For full-year 2012, Salesforce.com raised its revenue outlook to $2.15–$2.17 billion from $2.03–$2.05 billion. The diluted GAAP loss per share is expected in the range of 1-3 cents, while diluted non-GAAP EPS is projected in the range of $1.30 to $1.32.
For both the second quarter and fiscal year, Salesforce.com assumes an average diluted share count of 145 million.
Salesforce.com expects the Radian6 deal to materially boost second quarter 2012 revenues by roughly $5.0 million, while reducing non-GAAP EPS by about 8 cents.
For fiscal 2012, the deal is expected to be accretive to revenue by $45.0 million to $50.0 million, but dilutive to non-GAAP EPS by about 11 cents. The company now foresees fiscal 2012 revenue of $2.075 billion to $2.10 billion and non-GAAP EPS of $1.24 to $1.27.
Agreement of Analysts
Out of the 14 analysts providing estimates for the second quarter, none revised estimates in the last 7 and 30 days. Sixteen analysts provided estimates for fiscal 2012, and we noticed one upward and one downward movement in the last 30 days.
The downward movement was in the last 7 days, possibly indicating negative sentiment. For fiscal 2013, there was one downward movement in the last 7 days.
Some analysts are optimistic on the opportunities across the entire product line (Sales Cloud, Service Cloud, Platform, and Collaboration). They expect Salesforce.com to provide a detailed outlook in its upcoming user conference, Dreamforce 2011, to be hosted in San Francisco between August 30 and September 2.
The analysts also find Chatter a key driver of Salesforce.com’s enterprise license agreements. Moreover, they remain encouraged with the acquisition of Radian6 in May, as it will help the company capture the huge growth opportunity in media monitoring.
However, continuous R&D investments will remain a concern as it could rationalize the margins to some extent.
Magnitude of Estimate Revisions
The movement of the Zacks Consensus Estimate for the second quarter is positive, increasing 2 cents in the last 90 days to 4 cents. For the past 90 days, the Zacks Consensus Estimates for full-year 2012 decreased 6 cents to 24 cents, reflecting a negative sentiment. The Zacks Consensus Estimate for fiscal 2013 also dropped 8 cents in the past ninety days.
Recommendation
Based on the company’s guidance, we expect a sequentially strong quarter, although the Radian6 integration will dilute earnings.
We are also encouraged by the strategic alliance between Salesforce.com and Toyota Motors Corp. (TM), as it opens up opportunities in the evolving automotive vertical.
Currently, Salesforce.com has a Zacks #2 Rank, implying a short-term Buy recommendation.
SALESFORCE.COM (CRM): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment