Cloud computing and customer relationship management giant Salesforce.com, Inc. (CRM) will report third-quarter earnings on Wednesday, Nov. 18, after the ring of the closing bell.
Up more than 25% year-to-date, CRM stock has been one of Wall Street’s shining stars in 2015.
But while the big boys are mostly focusing on storage, collaboration software and Big Data, CRM has a firm grip on the customer relationship management field, the space from which it derives its “CRM” ticker symbol.
It’s got a profitable little niche carved out for it; and with some exposure to the human resources market as well, it’s no wonder this is one of seven high-profile stocks growing revenue more quickly than AAPL.
Without further ado, let’s take a look at what analysts are expecting from CRM for Q3.
Growth, Growth, Growth
Wall Street expects Salesforce to haul in $1.7 billion in the quarter ended Oct. 31. That’s 22.9% higher than the $1.38 billion it logged in the year-ago period. CRM earnings per share are projected to clock in at 19 cents, a full 36% higher than the 14 cents per share it earned in the year-ago quarter.
That said, I wouldn’t be surprised to see CRM stock top those earnings estimates. After all, if you keep one eye on history, you’ll see that CRM has a habit of walloping earnings expectations.
As a matter of fact, CRM stock hasn’t missed earnings estimates one single time in the last 14 quarters, a streak dating back to May 2012. It’s met estimates, but never once dared to miss them. Over that period, Salesforce stock has rallied 118%, outperforming the S&P’s 50% gain by 68 percentage points.
That said, guidance may end up being the key factor in determining how Wall Street responds to the quarter. Currently the Street believes CRM will guide for 19 cents in adjusted Q4 earnings (range between 17 cents and 24 cents), with a revenue midpoint of $1.78 billion (a $1.76 to $1.8 billion range).
All in all, Salesforce’s impressive execution and staying power in the software-as-a-service industry have set expectations pretty high. CRM stock currently trades at nearly 80 times forward earnings, which isn’t cheap by any measure.
There’s some legitimate concern that the company may be overvalued. One theory posited by NPR Planet Money even stipulates that the construction of the Salesforce Tower in San Francisco, which will soon be the tallest building west of the Mississippi, is a signal of hubris, overconfidence and a market top.
Only time will tell. But for now, all eyes are on CRM earnings when they come after the bell on Wednesday.
As of this writing, John Divine was long AMZN stock and long AAPL stock. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.