Salesforce.com, Inc. Defies Expectations Again! (CRM)

There was a lot to live up to coming into earnings, but Salesforce delivered

Salesforce.com, Inc. (CRM) stock is soaring in early morning trading on Thursday, after putting together a pretty spectacular fiscal first quarter. The cloud-based customer relationship management company beat on both earnings and revenue, while simultaneously raising full-year revenue guidance.

CRM Stock: Salesforce.com, Inc. Defies Expectations Again!The good ol’ “beat and raise.”

The “beat and raise” may sound like a perverse new-age dance move, and while it isn’t a dance move (yet), CRM stock owners will be excused for dancing in the streets today.

CRM Stock: Q1 by the Numbers

I noted a few days ago that the expectations were pretty lofty for Salesforce going into earnings season, which makes it all the more remarkable to see the company execute so well. CRM stock deserves the 5% gains it’s enjoying in early action on Thursday.

Adjusted earnings per share jumped 50% from the year-ago period, advancing from 16 cents per share to 24 cents per share. Revenue, for its part, rose 27% to clock in at $1.92 billion in the first quarter of fiscal 2017.

Analysts expected EPS to come in at 23 cents on revenue of $1.89 billion, so CRM stock owners have reason to rejoice. But the “raise” part of the “beat and raise” could arguably be the most beautiful part.

Salesforce now thinks full-year fiscal 2017 revenue will clock in between $8.16 billion and $8.20 billion, for a midpoint of $8.18 billion. Previously, CRM had expected revenue between $8.08 billion and $8.12 billion, a midpoint of $8.1 billion. The fact that the midpoint was raised by $80 million, but Salesforce only beat Q1 estimates by $30 million, means that the majority of the raise is due to business Salesforce expects later in the year.

I noted on Tuesday that at a forward price-earnings ratio of 60, CRM stock owners are essentially betting on solid execution — and higher margins — for Salesforce shares to beat the market.

While quite often lofty multiples assume too much of management’s ability to execute, Salesforce certainly didn’t let anyone down in the first quarter. And, right on cue, it boosted its non-GAAP operating margin by a remarkable 283 basis points, marking its eighth straight quarter of year-over-year margin improvement.

One could even argue that Salesforce’s earnings release got in a subtle dig at its rival Oracle Corporation (ORCL), whose database technology CRM currently uses. Salesforce is making serious efforts to pivot away from Oracle’s database tech as ORCL pushes more seriously into Salesforce’s bread-and-butter, customer relationship management software.

Salesforce COO Keith Block was the one who got the dig in:

“We continued to drive larger and more strategic transactions in the first quarter, including yet another 9-figure transaction. No other enterprise software company is building strategic relationships of this size and scale—and certainly not at this pace.”

No other enterprise software company … You hear that, Larry Ellison? Go kick rocks, bub. CRM stock owners will just be here, dancing.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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