What to Expect When Salesforce.com (CRM) Reports Earnings Wednesday

NEW YORK (TheStreet) -- Shares of Salesforce.com Inc (CRM) are trading down 2.82% to $69.46 in mid-morning trading Wednesday, ahead of the cloud-computing giant's first-quarter earnings, scheduled to be released after the market closes later today.

For the quarter that ended April, the company is expected to earn 14 cents per share on revenue of $1.5 billion.

In the same quarter of last year, Salesforce.com earned 11 cents per share on revenue of $1.23 billion.

Analysts at Goldman Sachs said in a note last Thursday that they expect Salesforce to report an in-line first quarter.

The firm raised its price target to $87 from $78, and kept its "conviction buy" rating on the stock.

In addition, Salesforce.com has been rumored to have interested buyers including Microsoft (MSFT) and Orcale (ORCL).

San Francisco-based Salesforce.com is a provider of enterprise cloud computing solutions that helps with customer relationship management.

The company delivers its service through Internet browsers and mobile devices, and markets its social enterprise applications and platforms to businesses on a subscription basis, primarily through its direct sales efforts and indirectly through partners.

Separately, TheStreet Ratings team rates SALESFORCE.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 26.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 47.36% and other important driving factors, this stock has surged by 40.47% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SALESFORCE.COM INC has improved earnings per share by 47.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SALESFORCE.COM INC reported poor results of -$0.42 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus -$0.42).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, SALESFORCE.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.38, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.66 is low and demonstrates weak liquidity.
  • You can view the full analysis from the report here: CRM Ratings Report

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