It goes without saying that the Zacks Computer and Technology Sector has been hit hard in 2022 amid a challenging macroeconomic backdrop, down more than 20%. However, the tide is looking to shift – the sector is up 7% over the last month.
A widely-followed stock in the sector, Salesforce CRM, is on deck to unveil Q2 earnings on Wednesday, August 24th, after market close.
Salesforce is the leading provider of on-demand Customer Relationship Management (CRM) software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics, and custom application development.
The company carries a Zacks Rank #3 (Hold) with an overall VGM Score of a C. How does everything stack up for the company heading into the release? Let’s take a closer look.
Share Performance & Valuation
It’s been a challenging ride for Salesforce shares in 2022, down more than 30% and coming nowhere near the general market’s performance.
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Even over the S&P 500’s rally over the last month, CRM shares have lagged, notching a marginal 0.4% decline.
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In addition, CRM shares trade at steep valuation levels, further bolstered by its Style Score of a D for Value. The company’s 5.8X forward price-to-sales ratio is well below its five-year median of 7.8X but represents a steep 61% premium relative to its Zacks Sector.
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Quarterly Estimates
Surprisingly, analysts have been quiet for the quarter to be reported, with zero earnings estimate revisions coming in over the last 60 days. Still, the Zacks Consensus EPS Estimate of $1.02 reflects a 31% Y/Y decline in quarterly earnings.
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However, the company’s top-line is in much better shape – Salesforce is projected to have raked in $7.7 billion in revenue throughout the quarter, penciling in a sizable 21% year-over-year uptick.
Quarterly Performance & Market Reactions
CRM has been on a blazing hot earnings streak, exceeding the Zacks Consensus EPS Estimate in each of its previous ten quarters. Just in its latest print, the company recorded a solid 5.4% bottom-line beat.
Top-line results have been just as stellar – CRM has exceeded revenue estimates in each of its previous ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.
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In addition, the market hasn’t liked what it’s seen from CRM as of late, with shares moving downwards following two of its previous three quarterly prints.
Putting Everything Together
CRM shares have tumbled year-to-date, underperforming the general market by a wide margin. Despite the market’s rally over the last month, shares have still lagged.
The company’s shares trade at steep valuation levels, well above their Zacks Sector Average but below their five-year median.
Analysts have been quiet for the quarter to be reported, but estimates reflect a declining bottom-line and an increasing top-line.
Furthermore, the company has consistently exceeded quarterly estimates, but the market hasn’t reacted favorably as of late following the last three prints.
Heading into the release, Salesforce CRM carries a Zacks Rank #3 (Hold).
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