Look For Short-Term Volatility In Salesforce When Q3 Report Releases

D.A. Davidson expects an in-line EPS when salesforce.com, inc. CRM releases its third-quarter results on November 17 after the market close. However, the brokerage expects short-term volatility in the sha res if the company provides a conservative outlook for FY 2018.

Analyst's Expectations

For the third quarter, analyst Jack Andrews expects EPS of $0.21, in line with consensus and within the company guidance calling for $0.20–$0.21. The analyst now projects revenue to grow 23.1 percent year-over-year to $2.107 billion, slightly below consensus of $2.119 billion and guidance calling for $2.110 billion–$2.120 billion.

“We note that CRM has met or beaten consensus revenue and EPS estimates in each quarter for at least the past seven years,” Andrews wrote in a note.

Andrews pointed out that salesforce’s billings growth is meaningfully trailing revenue growth. The analyst predicts third quarter billings to grow 12.5 percent to $1.714 billion and deferred revenue estimate of $3.430 billion represents a 20.5 percent growth, versus company guidance of 20 percent.

Currency Influences

Meanwhile, Andrews expects the currency fluctuations, especially in GBP and Japanese yen, should modestly hurt results for the remainder of FY 2017 and FY 2018. For context, international revenues account for about 27 percent of salesforce’s total revenues, with Europe representing about 17 percent and Asia accounting 9.5 percent.

Andrews has a Neutral rating on salesforce shares, with a price target of $80.

At last check, shares of salesforce had risen 1.76 percent on the day to $74.04.