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Salesforce.com (CRM) Down 1.2% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Salesforce.com due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Q1 Earnings & Sales Beat Estimates, Up Y/Y
Salesforce reported better-than-expected financial results for the first quarter of fiscal 2024. The enterprise cloud computing solution provider’s first-quarter fiscal 2024 non-GAAP earnings increased 71.4% to $1.69 per share from 98 cents reported in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.61.
The quarterly non-GAAP earnings were adversely impacted by a loss of 11 cents per share from mark-to-mark accounting of CRM’s strategic investments at a non-GAAP tax rate of 23.5%. However, the company’s ongoing restructuring initiative, which includes trimming the workforce, benefited first-quarter non-GAAP earnings by 72 cents per share.
Salesforce’s quarterly revenues of $8.25 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.17 billion. The top line also improved 13% in constant currency.
The company has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. Thus, the rapid adoption of its cloud-based solutions resulted in the better-than-anticipated performance in the fiscal first quarter.
Quarterly Details
Coming to CRM’s business segments, revenues from Subscription and Support (93% of the total revenues) increased 11.5% from the year-earlier period to $7.64 billion. Professional Services and Other (7% of total sales) revenues climbed 9% to $605 million.
Under the Subscription and Support segment, Sales Cloud revenues grew 10.9% year over year to $1.81 billion. Revenues from Service Cloud, one of the company’s largest and fastest-growing businesses, also improved 11.5% to $1.96 billion.
Marketing & Commerce Cloud revenues jumped 7.4% to $1.17 billion. Salesforce Platform and Other revenues were up 10.4% to $1.57 billion. Also, revenues from Data increased 18.4% year over year to $1.13 billion.
Geographically, Salesforce registered revenue growth of 10.3% in America (66.5% of the total revenues), 16% in the Asia Pacific (9.9%) and 12.3% in the EMEA (23.7%) on a year-over-year basis.
Salesforce’s gross profit came in at $6.12 billion, up 14.1% from the prior-year period. Moreover, the gross margin improved 200 basis points (bps) to 74%.
Salesforce recorded a non-GAAP operating income of $2.27 billion, indicating an increase of 73.9% from the year-ago quarter’s level of $1.31 billion. Moreover, the non-GAAP operating margin expanded 1,000 bps to 27.6% from 17.6% in the year-ago quarter due to lower operating expenses as a percentage of total sales. Operating expenses as a percentage of revenues declined to 69% from 72% in the year-ago quarter.
Balance Sheet & Other Details
Salesforce exited the fiscal first quarter with cash, cash equivalents and marketable securities of $14 billion, up from the $12.5 billion recorded at the end of the previous quarter.
CRM generated operating cash flow of $4.49 billion and free cash flow of $4.25 billion in the first quarter.
As of Apr 30, 2023, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $24.1 billion, up 12% on a year-over-year basis. In the fiscal first quarter, the company bought back shares worth $2.1 billion. With this buyback of shares, the company has now $9.9 billion remaining under its current authorization limit of $20 billion.
Strong Guidance for Q2 and FY24
Salesforce provided strong guidance for the second quarter and fiscal 2024. For the fiscal second quarter, Salesforce projects total sales between $8.51 billion and $8.53 billion (midpoint $8.52 billion), indicating 10% year-over-year growth.
The company expects no impact on second-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $1.89-$1.90 for the current quarter.
For fiscal 2024, Salesforce forecasts revenues in the range of $34.5-$34.7 billion. The company expects no impact from foreign currency exchange rates.
The company projects fiscal 2024 non-GAAP earnings between $7.41 and $7.43 per share. Salesforce estimates a non-GAAP operating margin of approximately 28% for fiscal 2024 and expects a year-over-year increase in operating cash flow in the 16-17% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 17.6% due to these changes.
VGM Scores
Currently, Salesforce.com has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Salesforce.com has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com belongs to the Zacks Computer - Software industry. Another stock from the same industry, Autodesk (ADSK - Free Report) , has gained 1.4% over the past month. More than a month has passed since the company reported results for the quarter ended April 2023.
Autodesk reported revenues of $1.27 billion in the last reported quarter, representing a year-over-year change of +8.5%. EPS of $1.55 for the same period compares with $1.43 a year ago.
For the current quarter, Autodesk is expected to post earnings of $1.72 per share, indicating a change of +4.2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Autodesk. Also, the stock has a VGM Score of B.
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Salesforce.com (CRM) Down 1.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Salesforce.com due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Q1 Earnings & Sales Beat Estimates, Up Y/Y
Salesforce reported better-than-expected financial results for the first quarter of fiscal 2024. The enterprise cloud computing solution provider’s first-quarter fiscal 2024 non-GAAP earnings increased 71.4% to $1.69 per share from 98 cents reported in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.61.
The quarterly non-GAAP earnings were adversely impacted by a loss of 11 cents per share from mark-to-mark accounting of CRM’s strategic investments at a non-GAAP tax rate of 23.5%. However, the company’s ongoing restructuring initiative, which includes trimming the workforce, benefited first-quarter non-GAAP earnings by 72 cents per share.
Salesforce’s quarterly revenues of $8.25 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.17 billion. The top line also improved 13% in constant currency.
The company has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. Thus, the rapid adoption of its cloud-based solutions resulted in the better-than-anticipated performance in the fiscal first quarter.
Quarterly Details
Coming to CRM’s business segments, revenues from Subscription and Support (93% of the total revenues) increased 11.5% from the year-earlier period to $7.64 billion. Professional Services and Other (7% of total sales) revenues climbed 9% to $605 million.
Under the Subscription and Support segment, Sales Cloud revenues grew 10.9% year over year to $1.81 billion. Revenues from Service Cloud, one of the company’s largest and fastest-growing businesses, also improved 11.5% to $1.96 billion.
Marketing & Commerce Cloud revenues jumped 7.4% to $1.17 billion. Salesforce Platform and Other revenues were up 10.4% to $1.57 billion. Also, revenues from Data increased 18.4% year over year to $1.13 billion.
Geographically, Salesforce registered revenue growth of 10.3% in America (66.5% of the total revenues), 16% in the Asia Pacific (9.9%) and 12.3% in the EMEA (23.7%) on a year-over-year basis.
Salesforce’s gross profit came in at $6.12 billion, up 14.1% from the prior-year period. Moreover, the gross margin improved 200 basis points (bps) to 74%.
Salesforce recorded a non-GAAP operating income of $2.27 billion, indicating an increase of 73.9% from the year-ago quarter’s level of $1.31 billion. Moreover, the non-GAAP operating margin expanded 1,000 bps to 27.6% from 17.6% in the year-ago quarter due to lower operating expenses as a percentage of total sales. Operating expenses as a percentage of revenues declined to 69% from 72% in the year-ago quarter.
Balance Sheet & Other Details
Salesforce exited the fiscal first quarter with cash, cash equivalents and marketable securities of $14 billion, up from the $12.5 billion recorded at the end of the previous quarter.
CRM generated operating cash flow of $4.49 billion and free cash flow of $4.25 billion in the first quarter.
As of Apr 30, 2023, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $24.1 billion, up 12% on a year-over-year basis. In the fiscal first quarter, the company bought back shares worth $2.1 billion. With this buyback of shares, the company has now $9.9 billion remaining under its current authorization limit of $20 billion.
Strong Guidance for Q2 and FY24
Salesforce provided strong guidance for the second quarter and fiscal 2024. For the fiscal second quarter, Salesforce projects total sales between $8.51 billion and $8.53 billion (midpoint $8.52 billion), indicating 10% year-over-year growth.
The company expects no impact on second-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $1.89-$1.90 for the current quarter.
For fiscal 2024, Salesforce forecasts revenues in the range of $34.5-$34.7 billion. The company expects no impact from foreign currency exchange rates.
The company projects fiscal 2024 non-GAAP earnings between $7.41 and $7.43 per share. Salesforce estimates a non-GAAP operating margin of approximately 28% for fiscal 2024 and expects a year-over-year increase in operating cash flow in the 16-17% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 17.6% due to these changes.
VGM Scores
Currently, Salesforce.com has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Salesforce.com has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com belongs to the Zacks Computer - Software industry. Another stock from the same industry, Autodesk (ADSK - Free Report) , has gained 1.4% over the past month. More than a month has passed since the company reported results for the quarter ended April 2023.
Autodesk reported revenues of $1.27 billion in the last reported quarter, representing a year-over-year change of +8.5%. EPS of $1.55 for the same period compares with $1.43 a year ago.
For the current quarter, Autodesk is expected to post earnings of $1.72 per share, indicating a change of +4.2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Autodesk. Also, the stock has a VGM Score of B.