Will salesforce.com, Inc. (CRM) Miss Earnings Estimates? - Analyst Blog

The world's leading CRM platform provider salesforce.com, Inc. CRM is set to report its first-quarter fiscal 2015 results on May 20. Last quarter, the company posted a negative earnings surprise of 37.5%. It is also worth noting that salesforce has underperformed the Zacks Consensus Estimate in all the four preceding quarters with a negative earnings surprise average of 240.6%.

Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

The company reported mixed fourth-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 strong spending on digital marketing are encouraging. Moreover, 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 due to intensifying competition. Moreover, continued weakness in Europe, currency headwinds and increased investments in research & development (R&D) will  keep margins under pressure.

Earnings Whispers?

Our proven model does not conclusively show that salesforce will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #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 3 cents. Hence, the difference is 0.00%.

Zacks Rank: salesforce's Zacks Rank #3 (Hold) 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 Stocks to Consider

Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

BlackBerry Limited BBRY has an Earnings ESP of +17.86% and holds a Zacks Rank #2 (Buy).

Infinera Corporation INFN, Earnings ESP of +33.33% and a Zacks Rank #2

Intuit Inc. INTU, Earnings ESP of +1.18% and a Zacks Rank #2
 

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