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SAP SE (SAP) Reports Y/Y Increase in Q1 Earnings, Ups View
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SAP SE (SAP - Free Report) reported first-quarter 2018 IFRS earnings per share of €0.59 (71 cents), reflecting a surge of 37% on a year-over-year basis. The year-over-year improvement was primarily attributable to a notable increase in operating profit. However, the bottom line fell short of the Zacks Consensus Estimate of 87 cents per share.
Total revenues, on IFRS basis, for the quarter were €5.26 billion ($6.42 billion), almost flat year over year and also missed the Zacks Consensus Estimate of $6.51 billion. A flourishing cloud business, along with strong growth of support revenues, aided top-line growth during the quarter.
New cloud bookings — a key indicator of sales success in cloud business — were up an impressive 25% (at constant currency) to €245 million in the reported quarter. The company's customer experience solutions witnessed triple digit year-over-year growth in new cloud bookings. During the quarter, Jaguar Land Rover, Coca-Cola, and Unilever were added to SAP's customer experience solutions client base.
Inside the Headlines
Cloud and Software business, which includes Cloud Subscriptions & Support and Software licenses & support, reported first-quarter revenues of €4.35 billion, up 0.5% year over year.
Cloud Subscriptions & Support garnered revenues of €1.07 billion in the quarter, up 18% year over year. On the other hand, Software licenses & support reported revenues of €3.28 billion, down 4% on a year-over-year basis.
The EMEA region observed phenomenal growth in Cloud subscriptions and support revenues, particularly in Germany. SAP also witnessed double-digit software revenue growth in the United Kingdom.
In the APJ region, SAP witnessed strong performance of cloud and software revenues and cloud subscriptions, led by robust performance in Japan, China. Australia, China and India, which recorded double-digit growth in software revenues.
The company reported IFRS operating profit of €1.03 billion, up 52% on a year-over-year basis. Operating margin of 23.6% increased 800 basis points (bps) increase from the year-ago quarter.
The impressive profit and resultant margin was attributed to the positive impact of the adoption of IFRS 15 in 2018.
SAP’s human capital management (‘‘HCM’’) applications continue to boost the top line, including the likes of SuccessFactors and SAP Fieldglass. At the end of the quarter, SAP SuccessFactors Employee Central had above 2,400 customers with prominent names like CaixaBank, Reckitt Benckiser Group plc and HiPP among others.
Additionally, continued market traction of the SAP S/4HANA platform is proving to be a sturdy profit churner. During the reported quarter, S/4HANA adoption grew 43% from the year-ago quarter to 8,300 customers.
This apart, SAP’s business networks (which it manages through three main players, namely Ariba, Fieldglass and Concur) increased 16% during the reported quarter. SAP's Business Network Solutions added Migros and Ralph Lauren to its clientele during the quarter.
Other Financial Details
For the quarter ended Mar 31, 2018, the company’s operating cash flow came in at €2.58 billion down 10% on a year-over-year basis. Free cash flow decreased 17% year over year to €2.15 billion. The decline in cash flow was due to higher tax payments and currency headwinds.
Acquisition
The company concluded the acquisition of Callidus Software Inc. for $2.4 billion, on Apr 5, 2018. The company had entered into a definitive agreement to acquire Callidus on Jan 30, 2017.
The terms of the deal represent a purchase price of $36 per share. The buyout not only gives SAP access to new sales analytic and customer engagement tools but also boosts its foothold in $46 billion cloud-based customer relationship management (“CRM”) market.
SAP anticipates the deal to be neutral to its non-IFRS earnings for 2018 and accretive to 2019 non-IFRS earnings.
The company plans to consolidate its vibrant SAP Hybris cloud portfolio, part of its Cloud Business Group with CallidusCloud product assets.
With the buyout of Callidus, SAP will boost its strength in front-office and back-office software, thereby increasing its operational efficiencies.
Guidance
On the back of the completion of the acquisition of Callidus Software and stellar operating profits recorded in the first quarter, SAP raised its guidance for 2018. The company expects non-IFRS total revenues to come in the range of €24.8-€25.3 billion at constant currency (cc), up from the previous range of range of €24.6-€25.1 billion. This represents growth of 5.5-7.5% year over year. The contribution of Callidus Software is expected to be around €200 million.
Additionally, non-IFRS operating profit for 2018 is estimated to be in the band of €7.35-€7.5 billion, up from €7.3-€7.5 billion, reflecting year-over-year growth of 8.5-11%. Callidus is expected to provide €10 million.
The long-term earnings growth rates for Western Digital, Micron and Paycom are projected to be 19%, 10% and 24.8%, respectively.
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SAP SE (SAP) Reports Y/Y Increase in Q1 Earnings, Ups View
SAP SE (SAP - Free Report) reported first-quarter 2018 IFRS earnings per share of €0.59 (71 cents), reflecting a surge of 37% on a year-over-year basis. The year-over-year improvement was primarily attributable to a notable increase in operating profit. However, the bottom line fell short of the Zacks Consensus Estimate of 87 cents per share.
Total revenues, on IFRS basis, for the quarter were €5.26 billion ($6.42 billion), almost flat year over year and also missed the Zacks Consensus Estimate of $6.51 billion. A flourishing cloud business, along with strong growth of support revenues, aided top-line growth during the quarter.
New cloud bookings — a key indicator of sales success in cloud business — were up an impressive 25% (at constant currency) to €245 million in the reported quarter. The company's customer experience solutions witnessed triple digit year-over-year growth in new cloud bookings. During the quarter, Jaguar Land Rover, Coca-Cola, and Unilever were added to SAP's customer experience solutions client base.
Inside the Headlines
Cloud and Software business, which includes Cloud Subscriptions & Support and Software licenses & support, reported first-quarter revenues of €4.35 billion, up 0.5% year over year.
Cloud Subscriptions & Support garnered revenues of €1.07 billion in the quarter, up 18% year over year. On the other hand, Software licenses & support reported revenues of €3.28 billion, down 4% on a year-over-year basis.
The EMEA region observed phenomenal growth in Cloud subscriptions and support revenues, particularly in Germany. SAP also witnessed double-digit software revenue growth in the United Kingdom.
In the APJ region, SAP witnessed strong performance of cloud and software revenues and cloud subscriptions, led by robust performance in Japan, China. Australia, China and India, which recorded double-digit growth in software revenues.
The company reported IFRS operating profit of €1.03 billion, up 52% on a year-over-year basis. Operating margin of 23.6% increased 800 basis points (bps) increase from the year-ago quarter.
The impressive profit and resultant margin was attributed to the positive impact of the adoption of IFRS 15 in 2018.
SAP SE Price, Consensus and EPS Surprise
SAP SE Price, Consensus and EPS Surprise | SAP SE Quote
Quarter in Detail
SAP’s human capital management (‘‘HCM’’) applications continue to boost the top line, including the likes of SuccessFactors and SAP Fieldglass. At the end of the quarter, SAP SuccessFactors Employee Central had above 2,400 customers with prominent names like CaixaBank, Reckitt Benckiser Group plc and HiPP among others.
Additionally, continued market traction of the SAP S/4HANA platform is proving to be a sturdy profit churner. During the reported quarter, S/4HANA adoption grew 43% from the year-ago quarter to 8,300 customers.
This apart, SAP’s business networks (which it manages through three main players, namely Ariba, Fieldglass and Concur) increased 16% during the reported quarter. SAP's Business Network Solutions added Migros and Ralph Lauren to its clientele during the quarter.
Other Financial Details
For the quarter ended Mar 31, 2018, the company’s operating cash flow came in at €2.58 billion down 10% on a year-over-year basis. Free cash flow decreased 17% year over year to €2.15 billion. The decline in cash flow was due to higher tax payments and currency headwinds.
Acquisition
The company concluded the acquisition of Callidus Software Inc. for $2.4 billion, on Apr 5, 2018. The company had entered into a definitive agreement to acquire Callidus on Jan 30, 2017.
The terms of the deal represent a purchase price of $36 per share. The buyout not only gives SAP access to new sales analytic and customer engagement tools but also boosts its foothold in $46 billion cloud-based customer relationship management (“CRM”) market.
SAP anticipates the deal to be neutral to its non-IFRS earnings for 2018 and accretive to 2019 non-IFRS earnings.
The company plans to consolidate its vibrant SAP Hybris cloud portfolio, part of its Cloud Business Group with CallidusCloud product assets.
With the buyout of Callidus, SAP will boost its strength in front-office and back-office software, thereby increasing its operational efficiencies.
Guidance
On the back of the completion of the acquisition of Callidus Software and stellar operating profits recorded in the first quarter, SAP raised its guidance for 2018. The company expects non-IFRS total revenues to come in the range of €24.8-€25.3 billion at constant currency (cc), up from the previous range of range of €24.6-€25.1 billion. This represents growth of 5.5-7.5% year over year. The contribution of Callidus Software is expected to be around €200 million.
Additionally, non-IFRS operating profit for 2018 is estimated to be in the band of €7.35-€7.5 billion, up from €7.3-€7.5 billion, reflecting year-over-year growth of 8.5-11%. Callidus is expected to provide €10 million.
Zacks Rank & Stocks to Consider
SAP presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space include Western Digital Corporation (WDC - Free Report) , Micron Technology, Inc. (MU - Free Report) and Paycom Software, Inc. (PAYC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
The long-term earnings growth rates for Western Digital, Micron and Paycom are projected to be 19%, 10% and 24.8%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>