Salesforce Reports Earnings on Tuesday: 3 Key Things to Watch

Investors will be keeping an eye on Salesforce's margins, revenue under contract and how Tableau is doing under the Salesforce tent.
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Salesforce is slated to post its latest earnings on Tuesday after the close, and investors are looking for signs of continued growth at the customer relationship management giant. 

Salesforce  (CRM) - Get Report shares fell 2.9% to $184.02 on Monday amid a broader market selloff tied to coronavirus fears. For Salesforce's fiscal fourth quarter ending in January, analysts polled by FactSet are expecting earnings of 56 cents per share on $4.75 billion in sales, and maintain an average price target of $203.51 per share.  

Here are a few key themes to watch when Salesforce reports on Feb. 25:

1. Tableau

Ever since Salesforce bought data visualization firm Tableau, investors have been eager for more details on how the latter will be incorporated into Salesforce’s core suite -- and how to value any sales synergies that exist between the two. Citing a survey of Salesforce partners, JP Morgan analysts wrote that it expects to see a “strong wave of renewals ... as customers desire coterminous contracts including Tableau.” At a recent Jeffries investor conference, the CEO of Mulesoft, which Salesforce acquired in 2018, said that data generated from Mulesoft will help boost Tableau’s value prop by “10x” in the eyes of customers. On Tuesday, investors will look for further updates on the progress of any integrations.

2. Guidance

Analysts at Morgan Stanley wrote in a recent note that Salesforce may raise its fiscal 2021 sales guidance to somewhere in the range of $21 billion. Part of that boost could be driven by growth in Salesforce’s CRPO (current remaining performance obligation) that beats expectations. CRPO is revenue under contract that hasn’t yet been recognized as revenue, and Morgan Stanley expects 25% growth in CRPO versus consensus guidance of 21%. If those estimates are accurate, it bodes well for continued healthy revenue growth over the next year.

3. Margins

Conversations around Salesforce’s annual Dreamforce conference highlighted a key debate in the stock: How will its big-ticket acquisition of Tableau, which it purchased for $15.7 billion last year, impact its margins? Salesforce’s revenues have expanded at a consistent clip over the past several years, but its margins have not. As Salesforce continues to digest its growth-fueling acquisitions, expect continued scrutiny of its consolidated margins going forward. 

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