Salesforce.com (NYSE:CRM) is set to report FQ4 2014 earnings after the market closes on Thursday, February 27th. Salesforce is a cloud based computing company best known for its customer relationship management (crm) product. Cloud computing is expecting to be a major area of economic growth within the next decade and Salesforce is currently ranked by Forbes as the #1 most innovative company. CRM shares have been on fire in 2014 and are up 16% through a period where most stocks sold off in January. This quarter investors have lofty revenue expectations for Salesforce.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for CRM to report 6c EPS and $1.129B revenue, while the current Estimize.com consensus from 41 Buy Side and Independent contributing analysts is 7c EPS and $1.139B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Salesforce to beat the Wall Street consensus by 1c EPS and $10million in revenue.
Over the previous 6 quarters the consenus from Estimize.com has been more accurate than Wall Street in predicting Salesforce's revenue everytime and has been more accurate in forecasting EPS 3 times. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a larger differential for Salesforce.
The distribution of estimates published by analysts on the Estimize.com platform range from 4c to 10c EPS and $1.120B to $1.180B in revenues. This quarter we're seeing a wide distribution of estimates for Salesforce.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months the Wall Street EPS consensus remained flat at 6c while the Estimize.com consensus inched higher from 6c to 7c. Over the same period of time the Wall Street revenue consensus increased from $1.113B to $1.129B while the Estimize consensus rose from $1.134B to $1.139B. Timeliness is correlated with accuracy and upward analyst revisions at the very end of the quarter are often a bullish indicator.
The analyst with the highest estimate confidence rating this quarter is TechStockRadar, who projects 7c EPS and $1.135B in revenue. This season TechStockRadar touts an impressive record of being more accurate than Wall Street on EPS and revenue 71% and 67% of the time respectively. In the Winter 2014 season TechStockRadar is rated as the 6th best analyst and is ranked 16th overall among over 3,900 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case TechStockRadar is expecting Salesforce to match the Estimize consensus on EPS but come report between Estimize and the Street on revenue.
This quarter CRM is expected to report all time revenue to the tune of 35% growth compared to FQ4 last year. Cloud computing is expected to be a major area of growth in the near future and Salesforce in a leader in cloud computing applications. On Thursday contributing analysts on the Estimize.com platfrom are expecting Salesforce to continue its momentum and beat Wall Street expectations on both the top and bottom line.