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SAP's Q3 Earnings & Revenues Up Y/Y on Cloud Strength, Outlook Raised
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SAP SE (SAP - Free Report) reported third-quarter 2024 non-IFRS earnings per share (EPS) of €1.23 ($1.35), which increased 6% from the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.31.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
SAP achieved significant growth in its cloud revenues, especially Cloud ERP Suite, and progress in Business AI, with key innovations like SAP Knowledge Graph gaining traction. The company reported total revenues on a non-IFRS basis of €8.47 billion ($9.309 billion), which increased 9% year over year (up 10% at constant currency or cc). The Zacks Consensus Estimate was pegged at $9.263 billion.
In response to the results, SAP’s shares were up 3.5% in the pre-market trading on Oct. 22. Shares of the company have gained 73.6% in the past year compared with the sub-industry's growth of 29.3%.
Image Source: Zacks Investment Research
Cloud Results
The current cloud backlog — a key indicator of go-to-market success in cloud business — surged 25% (up 29% at cc) to €15.38 billion. Synergies from the acquisition of WalkMe resulted in the upside, with a nearly 1%-point contribution to the growth rate.
On a non-IFRS basis, the Cloud and software segment (87.7% of total revenues) registered revenues of €7.43 billion, rising 11% year over year (up 12% at cc).
Cloud revenues were €4.35 billion, up 25% year over year on a non-IFRS basis (up 27% at cc). A major driver behind the cloud growth was Cloud ERP Suite revenues, which jumped 34% to €3.64 billion (up 36% at cc). SAP’s cloud business gained robust momentum across Brazil, Chile, Germany, Italy, India, Japan and Spain. It remained strong in the United States, Saudi Arabia and China.
Software licenses and support revenues totaled €3.08 billion, which decreased 4% (down 3% at cc) year over year. Non-IFRS software license revenues of €0.28 billion declined 15% (down 14% at cc) year over year.
Services business (12.3% of total revenues) posted revenues of €1.04 billion, down 2% year over year (both at nominal and cc basis).
Expanding Clientele Bodes Well
Rise with SAP solution was adopted by clients, including eBay, JAPAN AIRLINES, Roche, Rolls-Royce Power Systems, B3, CAF - the Development Bank of Latin America and the Caribbean, Chalhoub Group, Cochlear, Dakota Provisions, E.ON, Energy Queensland, Equinor, FairPrice Group, Gestamp Servicios, Lands' End, Mercado Libre, Mondelez International, OLAM Global Agri, Schwarz Group, Siemens Healthineers, Southern Glazer's Wine & Spirits, SRAM, Tetra Pak, ZEON Corporation and Zwilling.
In the reported quarter, Clorox, CPKC Railways, J.M. VOITH, KAESER KOMPRESSOREN, Nvidia, Panasonic Energy of North America and VistaPrint went live on SAP S/4HANA Cloud.
Major global brands across various industries, including AAK, Aramark, Bosideng, BY-HEALTH, Continental Automotive Technologies, Duni Group, Hamburg Commercial Bank, HR Campus, Kruger Services, Manchester City Council, Merck KGaA, PayPal, pfm medical, RWE and VP Bank, adopted SAP’s solutions.
The "GROW with SAP" solution, which focuses on aiding smaller businesses to adopt cloud ERP solutions quickly and efficiently, saw notable wins from companies like Dawn Foods, DXC Technology, Gainsight, L'OCCITANE Group, Mistral AI, Palmer Candy, The Pool Tile Company and SCHURTER Holding.
Margin Details
Non-IFRS gross profit of €6.24 billion increased 10% from the year-ago quarter’s figure (up 11% at cc).
Non-IFRS Cloud gross profit increased 27% year over year to €3.21 billion (up 28% at cc) Non-IFRS Cloud gross margin was 73.7%.
Non-IFRS operating profit of €2.24 billion increased 27% from the year-ago quarter’s figure (up 28% at cc). The expansion is driven by the successful execution of SAP’s 2024 transformation program and topline momentum.
SAP reported non-IFRS operating expenses of €6.23 billion, down 4% from the year-ago quarter’s level (down 5% at cc).
Balance Sheet & Cash Flow
As of Sept. 30, 2024, SAP had cash and cash equivalents of €10 billion compared with €9.378 billion in the previous year's quarter.
For the nine months that ended on Sept. 30, 2024, the company generated operating cash of €5.772 billion compared with €4.364 billion in the prior-year period.
In the third quarter, free cash flow rose 44% year over year to €1.25 billion.
In May 2023, SAP announced a repurchase program with an aggregate volume of up to €5 billion and an expiry date of Dec. 31, 2025. As of Sept. 30, 2024, SAP repurchased 16,709,250 shares at an average price of €157.09, resulting in payouts of €2.62 billion under the program.
2024 Guidance Updated
For 2024, management anticipates cloud and software revenues in the range of €29.5-€29.8 billion, suggesting an increase of 10-11% at constant currency (cc) on a year-over-year basis, elevating the midpoint by €400 million. The prior view was €29.0-29.5 billion at cc.
It now projects 2024 non-IFRS operating profit in the range of €7.8-€8 billion, indicating a rise of 20-23% at cc on a year-over-year basis, raising the midpoint by €150 million. The prior view was €7.6-7.9 billion at cc.
Free cash flow is now estimated in the €3.5-€4.0 billion band. Prior view was nearly €3.5 billion.
SAP reiterated guidance for cloud revenues. It continues to expect revenues in the range of €17-€17.3 billion, suggesting an increase of 24-27% at cc on a year-over-year basis.
BlackBerry (BB - Free Report) reported breakeven second-quarter fiscal 2025 earnings, better than the company’s estimate of a loss per share of 2-4 cents. In the year-ago quarter, it reported a non-GAAP loss per share of 4 cents. The Zacks Consensus Estimate was pegged at a loss of 3 cents per share.
Shares of BB have lost 23% in the past year.
Badger Meter, Inc (BMI - Free Report) reported EPS of $1.08 for the third quarter of 2024, beating the Zacks Consensus Estimate by 5.9%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of 88 cents.
Shares of BMI have gained 50.5% in the past year.
America Movil (AMX - Free Report) reported net income per ADR of 11 cents for the third quarter of 2024, up from 4 cents in the prior-year quarter.
Shares of AMX have gained 0.4% in the past year.
Note: €1 = $1.09893 (period average from July 1, 2024, to Sept. 30, 2024) €1 = $1.11602 (as of Sept. 30, 2024)
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SAP's Q3 Earnings & Revenues Up Y/Y on Cloud Strength, Outlook Raised
SAP SE (SAP - Free Report) reported third-quarter 2024 non-IFRS earnings per share (EPS) of €1.23 ($1.35), which increased 6% from the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.31.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
SAP achieved significant growth in its cloud revenues, especially Cloud ERP Suite, and progress in Business AI, with key innovations like SAP Knowledge Graph gaining traction. The company reported total revenues on a non-IFRS basis of €8.47 billion ($9.309 billion), which increased 9% year over year (up 10% at constant currency or cc). The Zacks Consensus Estimate was pegged at $9.263 billion.
In response to the results, SAP’s shares were up 3.5% in the pre-market trading on Oct. 22. Shares of the company have gained 73.6% in the past year compared with the sub-industry's growth of 29.3%.
Image Source: Zacks Investment Research
Cloud Results
The current cloud backlog — a key indicator of go-to-market success in cloud business — surged 25% (up 29% at cc) to €15.38 billion. Synergies from the acquisition of WalkMe resulted in the upside, with a nearly 1%-point contribution to the growth rate.
SAP SE Price, Consensus and EPS Surprise
SAP SE price-consensus-eps-surprise-chart | SAP SE Quote
On a non-IFRS basis, the Cloud and software segment (87.7% of total revenues) registered revenues of €7.43 billion, rising 11% year over year (up 12% at cc).
Cloud revenues were €4.35 billion, up 25% year over year on a non-IFRS basis (up 27% at cc). A major driver behind the cloud growth was Cloud ERP Suite revenues, which jumped 34% to €3.64 billion (up 36% at cc). SAP’s cloud business gained robust momentum across Brazil, Chile, Germany, Italy, India, Japan and Spain. It remained strong in the United States, Saudi Arabia and China.
Software licenses and support revenues totaled €3.08 billion, which decreased 4% (down 3% at cc) year over year. Non-IFRS software license revenues of €0.28 billion declined 15% (down 14% at cc) year over year.
Services business (12.3% of total revenues) posted revenues of €1.04 billion, down 2% year over year (both at nominal and cc basis).
Expanding Clientele Bodes Well
Rise with SAP solution was adopted by clients, including eBay, JAPAN AIRLINES, Roche, Rolls-Royce Power Systems, B3, CAF - the Development Bank of Latin America and the Caribbean, Chalhoub Group, Cochlear, Dakota Provisions, E.ON, Energy Queensland, Equinor, FairPrice Group, Gestamp Servicios, Lands' End, Mercado Libre, Mondelez International, OLAM Global Agri, Schwarz Group, Siemens Healthineers, Southern Glazer's Wine & Spirits, SRAM, Tetra Pak, ZEON Corporation and Zwilling.
In the reported quarter, Clorox, CPKC Railways, J.M. VOITH, KAESER KOMPRESSOREN, Nvidia, Panasonic Energy of North America and VistaPrint went live on SAP S/4HANA Cloud.
Major global brands across various industries, including AAK, Aramark, Bosideng, BY-HEALTH, Continental Automotive Technologies, Duni Group, Hamburg Commercial Bank, HR Campus, Kruger Services, Manchester City Council, Merck KGaA, PayPal, pfm medical, RWE and VP Bank, adopted SAP’s solutions.
The "GROW with SAP" solution, which focuses on aiding smaller businesses to adopt cloud ERP solutions quickly and efficiently, saw notable wins from companies like Dawn Foods, DXC Technology, Gainsight, L'OCCITANE Group, Mistral AI, Palmer Candy, The Pool Tile Company and SCHURTER Holding.
Margin Details
Non-IFRS gross profit of €6.24 billion increased 10% from the year-ago quarter’s figure (up 11% at cc).
Non-IFRS Cloud gross profit increased 27% year over year to €3.21 billion (up 28% at cc) Non-IFRS Cloud gross margin was 73.7%.
Non-IFRS operating profit of €2.24 billion increased 27% from the year-ago quarter’s figure (up 28% at cc). The expansion is driven by the successful execution of SAP’s 2024 transformation program and topline momentum.
SAP reported non-IFRS operating expenses of €6.23 billion, down 4% from the year-ago quarter’s level (down 5% at cc).
Balance Sheet & Cash Flow
As of Sept. 30, 2024, SAP had cash and cash equivalents of €10 billion compared with €9.378 billion in the previous year's quarter.
For the nine months that ended on Sept. 30, 2024, the company generated operating cash of €5.772 billion compared with €4.364 billion in the prior-year period.
In the third quarter, free cash flow rose 44% year over year to €1.25 billion.
In May 2023, SAP announced a repurchase program with an aggregate volume of up to €5 billion and an expiry date of Dec. 31, 2025. As of Sept. 30, 2024, SAP repurchased 16,709,250 shares at an average price of €157.09, resulting in payouts of €2.62 billion under the program.
2024 Guidance Updated
For 2024, management anticipates cloud and software revenues in the range of €29.5-€29.8 billion, suggesting an increase of 10-11% at constant currency (cc) on a year-over-year basis, elevating the midpoint by €400 million. The prior view was €29.0-29.5 billion at cc.
It now projects 2024 non-IFRS operating profit in the range of €7.8-€8 billion, indicating a rise of 20-23% at cc on a year-over-year basis, raising the midpoint by €150 million. The prior view was €7.6-7.9 billion at cc.
Free cash flow is now estimated in the €3.5-€4.0 billion band. Prior view was nearly €3.5 billion.
SAP reiterated guidance for cloud revenues. It continues to expect revenues in the range of €17-€17.3 billion, suggesting an increase of 24-27% at cc on a year-over-year basis.
SAP’s Zacks Rank
SAP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Companies
BlackBerry (BB - Free Report) reported breakeven second-quarter fiscal 2025 earnings, better than the company’s estimate of a loss per share of 2-4 cents. In the year-ago quarter, it reported a non-GAAP loss per share of 4 cents. The Zacks Consensus Estimate was pegged at a loss of 3 cents per share.
Shares of BB have lost 23% in the past year.
Badger Meter, Inc (BMI - Free Report) reported EPS of $1.08 for the third quarter of 2024, beating the Zacks Consensus Estimate by 5.9%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of 88 cents.
Shares of BMI have gained 50.5% in the past year.
America Movil (AMX - Free Report) reported net income per ADR of 11 cents for the third quarter of 2024, up from 4 cents in the prior-year quarter.
Shares of AMX have gained 0.4% in the past year.
Note: €1 = $1.09893 (period average from July 1, 2024, to Sept. 30, 2024)
€1 = $1.11602 (as of Sept. 30, 2024)