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Salesforce.Com, Inc. Q4 Earnings Preview: Set To Report Another Upside Quarter

 February 25, 2013 10:39 AM

(By Mani) Salesforce.com, inc. (NYSE: CRM) is expected to report earnings and revenue upside on strong bookings growth, when it would announce its fourth-quarter financial results on Feb.28.

San Francisco, California-based salesforce.com, which offers customer relationship management software, is one of the best positioned software companies with continued strong fundamentals and enterprise growth strategies.

Wall Street expects salesforce.com to earn 40 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies a decrease of 7 percent from 43 cents it earned last year. The company estimates earnings, excluding items, of 38 cents to 40 cents a share. Salesforce earnings have managed to beat Street view in all the past four quarters, in the range of 3.1 to 8.8 percent.

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For the full-year, analysts expect earnings of $1.52 a share, up from $1.36 a share prior year while salesforce sees 2012 earnings of $1.50 to $1.52 a share.

Quarterly revenues are estimated to increase 31.5 percent to $830.86 million from $631.91 million last year while the company sees revenue of $825 million to $830 million.

For the full year, sales are projected to rise 34.4 percent to $3.05 billion while the company expects 2012 sales to range between $3.041 billion and $3.046 billion.

"Based on our industry checks, we expect the company to exceed consensus/RBC revenue estimates of $831M/$829M, likely coming in closer to $835–840M vs. management's guidance of $825–830M. We believe the revenue upside along with lower operating expenses should lead to $0.01–0.02 EPS upside when compared to RBC/consensus of $0.39/$0.40," RBC Capital Markets analyst Robert Breza wrote in a note to clients.

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For a company like salesforce, deferred revenue is one of the most key metrics to look for. Deferred revenue on the balance sheet as of Oct. 31, 2012 was $1.29 billion, an increase of 41 percent on a year-over-year basis. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the third quarter at about $3 billion, up from approximately $2.8 billion at the end of the fiscal second quarter.

"We expect a strong bookings quarter, which should slightly exceed $1.3B representing, 19% growth vs. a tough year-on-year comparable of 57%," Breza noted.

Bookings could see possible upside driven by a few large eight-figure transactions in the quarter, which could lead to upside in deferred revenue.

However, the company would record a stock-based compensation expense of approximately $107 million in the quarter.

The company is expected to provide an in-line earnings and revenue outlook for the full year as the consistent theme in software this quarter has been incremental investments to drive future growth and has been a consistent theme for salesforce.com, as well.

For the third quarter, salesforce.com's loss widened to $220.30 million or $1.55 per share from $3.76 million or 3 cents per share last year. During the quarter, Salesforce.com recorded a non-cash charge to income tax expense of $149 million to establish a valuation allowance against a significant portion of its deferred tax assets.

Excluding special items, adjusted income for the three-month period was $49.64 million or 33 cents a share, compared to $49.01 million or 34 cents a share last year. Analysts expected earnings of 32 cents a share.

Salesforce, which competes with bigger rivals such as Oracle Corp. (NASDAQ:ORCL) and Sap AG (NYSE;SAP), recorded third quarter revenue of $788.40 million, up from $584.26 million last year. Analysts estimated revenues of $776.52 million for the quarter

Since the company reported third quarter results on Nov.20, the stock is up about 17 percent. Shares of the company, which trade at 112 times its 2013 consensus earnings estimate and 32 times its estimated 2013 cash flow per share, have been trading between $120.18 and $178.91 during the past 52-weeks.

Wall Street analysts, in general, have a positive opinion on salesforce.com stock, with 36 out of the 43 analysts covering CRM giving a "buy" or "strong buy" rating. Three analysts rate the stock as "hold," while 4 has a "sell" rating on the stock.



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