Salesforce Had A Strong Q4, Billings Exceed Expectations

William Blair reiterated its Outperform rating on salesforce.com, inc. CRM following its fourth quarter beat as continued expansion of large deals drove strong billings growth.

• Salesforce Reports Q4 Adj. EPS $0.28 vs $0.25 Est., Sales $2.29B vs $2.28B Est.
• Sees Q1'18 Adj. EPS $0.25-$0.26 vs $0.30 Est., Sales $2.34B-$2.35B vs $2.37B Est.
• Sees Q1 Billings Up about 6.4% vs 20% Est.
• Sees FY18 Adj. EPS $1.27-$1.29 vs $1.28 Est., Sales $10.15B-$10.2B vs $10.15B Est.

salesforce’s revenue rose 27 percent, to $2.29 billion, above consensus expectations of $2.28 billion, and non-GAAP EPS $0.03 above the Street’s $0.25 estimate. The company also grew billings by 33 percent $4.34 billion, topping the StreetAccount consensus expectation of 24.5 percent growth.

The company now has 100 $10 million-plus customers (on an annual basis) and the number of $20 million customers almost doubled versus year.

Related Link: Salesforce Still Best Positioned At The Top Of The Cloud

That said, shares were initially down as investors were surprised by the lower-than-expected billings guidance for the first quarter, raising doubts if a significant amount of deals were pulled forward from the first quarter into the fourth quarter.

“We believe that the company did not have a significant amount of deal pull-forward in the quarter, but rather the disparity between the fourth quarter and the first quarter is a trend that has continued to play out over the last few years and is largely a result of the timing of renewals and treatment of invoicing terms (in our opinion),” analyst Bhavan Suri wrote in a note.

Suri also pleased with the margin expansion guidance of 125 to 150 basis points despite the continued integration efforts with Demandware and 50 basis points of foreign exchange headwinds.

“In our view, traction in the enterprise segment, continued improvement in operating margins, and momentum with the Analytics Cloud and Commerce Cloud will all help drive the stock’s performance over the next 12 months,” Suri added.

At last check, shares of Salesforce rose 3.49 percent to $84.19.