Salesforce (CRM) Q4 Earnings: Can It Sustain Its Earnings Streak?

salesforce.com Inc. (NYSE:CRM) is slated to release fourth-quarter fiscal 2019 results on Mar 4.

Notably, the company delivered a positive surprise in all the trailing four reported quarters, the average being 35%.

In the last reported quarter, it came up with non-GAAP earnings of 61 cents per share, comprehensively exceeding the Zacks Consensus Estimate of 50 cents and also the year-ago quarter’s figure of 39 cents.

Revenues of $3.39 billion improved 26% year over year and also surpassed the Zacks Consensus Estimate of $3.37 billion. Moreover, the top line rose 26% at constant currency (cc). Additionally, the rapid adoption of the company’s cloud-based solutions led to the better-than-expected results.

What to Expect in Q4

For fourth-quarter fiscal 2019, revenues are projected between $3.551 billion and $3.561 billion, indicating a 25% increase year over year. Non-GAAP earnings are expected in the range of 54-55 cents per share.

The Zacks Consensus Estimate for earnings in the quarter to be reported is pegged at 56 cents, reflecting a year-over-year surge of 60%. The Zacks Consensus Estimate for sales of $3.56 billion indicates around 24.9% growth from the prior-year quarter.

So, let’s see how things are shaping up prior to this announcement.

Factors at Play

salesforce’s diverse cloud offerings, expanding partner base and a considerable spending on digital marketing are key growth drivers. The company’s strategy of frequent product launches and cloud services is helping it expand clientele, thereby driving top-line growth. The company continues to win customers in the international market, which in turn, is aiding it deliver strong growth internationally.

In the last reported quarter, the number of deals generating more than $1 million increased 46% year over year. Moreover, significant growth in the number of $20 million-plus deals has been the main channel of growth.

Additionally, acquisitions have always been one of salesforce’s key growth strategies, strengthening the company’s position in the customer relationship-management solution-providing space. Notably, MuleSoft’s merger with the company is a major positive. On the last earnings call, management indicated that the company will steadily invest in MuleSoft and other growth initiatives in the fiscal fourth quarter.

The company’s focus on AI and substantial progress with the launch of Einstein Analytics makes us optimistic. Moreover, salesforce's recently-unveiled Customer 360 platform is a tailwind.

salesforce’s consolidating relationships with cloud companies, namely Amazon (NASDAQ:AMZN) , Alphabet’s (NASDAQ:GOOGL) Google and International Business Machines (NYSE:IBM) among others are expected to be its key growth catalysts.

However, adverse foreign exchange volatility is a persistent overhang. The company anticipates a $200-million headwind to unearned revenues in the January quarter due to the recent strengthening of US dollar.

salesforce currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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