Salesforce.com (CRM) could be a solid addition to your portfolio given a notable revision in the company’s earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this customer-management software developer, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool — the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Salesforce.com, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $1.59 per share for the current quarter represents a change of +62.24% from the number reported a year ago.
The Zacks Consensus Estimate for Salesforce.com has increased 61.63% over the last 30 days, as 13 estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $6.96 per share for the full year, which represents a change of +32.82% from the prior-year number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, 17 estimates have moved up for Salesforce.com versus no negative revisions. This has pushed the consensus estimate 54.91% higher.
Favorable Zacks Rank
Thanks to promising estimate revisions, Salesforce.com currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
While strong estimate revisions for Salesforce.com have attracted decent investments and pushed the stock 7% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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