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If Workday Beat Consensus, That’ll Be 13 For 14 Quarters Since IPO

Well, it’s no Salesforce.com ( CRM ) in size, but investors are turning their attention to hot little rival Workday ( WDAY ), which reports earnings after the close Monday. The maker of cloud-based HR and financial software likely will show continued fast growth — while likely staying in the red as it spends to grow. For its fiscal Q4 2016 ended Jan. 31 , Workday guided to revenue of $317 million to $320 million, up 40% to 41% from the year-earlier quarter. Analysts polled by Thomson Reuters had modeled $320.3 million when Workday issued its Q3 results three months ago, but since then the consensus has slipped to $319.6 million. Workday didn’t forecast earnings, but analysts expect an adjusted loss per share of 4 cents vs. a 6-cent loss in the year-earlier quarter. Like many stocks, Workday has been scraping bottom lately, hitting a 39-month low on Feb. 9 at 47.32. Workday stock fell 16% on Feb. 5, but it wasn’t alone. That was the day Tableau Software ( DATA ) tanked 49.5% after releasing slower growth guidance for 2016, sending most software stocks down with it. Since then, Workday stock has enjoyed two good weeks, up 1% in early trading in the stock market today , near 60 but still down 25% for the year. Workday stock rose 3.2% Thursday, with enterprise software stocks helped by Salesforce.com’s late-Wednesday earnings beat and better-than-expected guidance. Salesforce.com stock rose 11% Thursday but was down a fraction early Friday. Noting that Workday “has beaten consensus revenue and EPS estimates in 12 of the 13 quarters it has been public,” D.A. Davidson analyst Jack Andrews is bullish. “We expect (Q4) revenue to grow 41.9% … to $321.2 million, above consensus … and above the high end of the (Workday-provided) guidance range. By segment, we are projecting 44.6% growth in subscription services to $263 million (81.9% of total revenue) and 31.0% growth in professional services to $58.2 million,” he said in a research report. He expects a 3-cent per-share loss minus items, a penny better than consensus. “One interesting note is that we believe Oracle ( ORCL ) has pulled back a bit on its promotional program on SaaS (Software as a Service) and aims to offer future promotions to customers tactically, rather than automatically,” Andrews wrote. Davidson maintains a buy rating on Oracle stock. It also has a buy rating on Workday stock, with a 99 price target. Oracle stock rose 1.8% Thursday, but was flat early Friday. Investment banker R.W. Baird on Thursday lowered its price target on Workday to 70 from 85, but it rates the stock outperform. “Workday’s share price has also been significantly reduced along with other high-valuation software stocks during the recent correction,” wrote Baird analyst Steven Ashley. In Workday’s Q3 earnings conference call with analysts, CFO Mark Peek said an adjusted operating profit likely wouldn’t happen until Q2 this year.

Salesforce.com Meets And Beats On Q4, Stock Jumps On Outlook

Salesforce.com ( CRM ) matched analyst forecasts on earnings and beat them on revenue with a record fourth quarter, but shares soared in late trade after the enterprise cloud pioneer raised its forecast for sales growth. Announcing earnings after the market close Wednesday, Salesforce said adjusted fourth-quarter earnings rose 36% to 19 cents per share on revenue that rose 25% to $1.81 billion. Earnings were right on the money, according to estimates from analysts polled by Thomson Reuters, but sales were better than the $1.79 billion revenue they had anticipated. The No. 1 developer of customer relationship management software, Salesforce raised full fiscal 2017 revenue guidance to a range of $8.08 billion to $8.12 billion, up from $8.0 billion to $8.1 guided after its third-quarter release. For its first fiscal quarter of 2017, which ends in April, Salesforce said it expects earnings per share of 23-24 cents, up 47% at the midpoint and ahead of analysts’ 21-cent consensus view. That’s on revenue up 25% to $1.89 billion, where analysts expected $1.86 billion, up 23%. Its results seemed to strengthen hope that Salesforce might trigger an upturn in software stocks, reversing Tableau Software ‘s ( DATA ) profitable but softer fourth quarter and weak guidance that triggered a 49.5% collapse in Tableau stock Feb. 5. Tableau’s misfortune also precipitated a 15% plunge in the entire IBD Computer Software-Database industry group, where legacy software developer Oracle ( ORCL ) also resides. Salesforce stock also fell 13% at the time, and the IBD Computer Software-Enterprise industry group where it lives fell 8%. Neither group has recovered, the most notable exception being steady Oracle, up slightly Wednesday to 36.63, 19% off a six-month high set June 17. Days after the Tableau debacle, Salesforce set a 16-month low at 52.60 on Feb. 8, before rising 19.5% through Tuesday’s close at 63.98. Salesforce ended the regular session down 0.6% to 62.50 in the stock market today . That was 24% off the stock’s all-time high of 82.90, hit Nov. 19, when Salesforce reported fiscal-third-quarter earnings up 50%. After Wednesday’s earnings release, Salesforce jumped more than 8% to 67.95 in after-hours trading. “By any measure, this was a spectacular finish to the year with 27% revenue growth in constant currency for the fourth quarter and for the full year,” Chief Executive Marc Benioff said in the earnings release. “We are raising our fiscal year 2017 revenue guidance to $8.12 billion at the high end of our range — unprecedented growth for a company of our size and scale.” Chief Financial Officer Mark Hawkins said its adjusted operating margin rose by 177 basis points, driving full-year operating cash flow up 37% to $1.6 billion during the fourth quarter. Said President and Chief Operating Officer Keith Block: “We hit an all-time high in large transactions in fiscal 2016,” adding that Salesforce’s cloud platform is growing sales “across every region, every cloud and every industry.” For full fiscal 2016, revenue rose 24% to $6.67 billion where analysts expected $6.65 billion. Salesforce said subscription and support revenue grew 24% to $6.21 billion and professional services and other revenue rose 28% to $462 million. The full-year adjusted earnings matched Wall Street at 75 cents. Salesforce managed to take a fourth-quarter unadjusted loss of 4 cents, better than the 6-cent loss expected by Wall Street. Beyond predicting Salesforce’s first $8 billion year in fiscal 2017, Benioff repeatedly assures that the company is “well on the path to reach $10 billion faster than any other enterprise software company.” RBC Capital Markets analyst Ross MacMillan said in a recent note to clients that the firm’s Salesforce1 platform for mobile-application development is driving fresh growth, although “there are many avenues to sustain growth, including service and marketing, the platform, and international and future initiatives.” MacMillan went on to say: “We think Salesforce can continue to drive premium growth for its size, and it remains an important strategic asset.” RBC maintains an outperform rating on Salesforce.com stock, with a price target of 80, as “one of the best positioned companies in large-cap software.” Image provided by Shutterstock .

Cerner Downgraded For Slowing Sales Growth, Migration To Services

Punished by investors a week ago for guiding Q1 a hair below Wall Street expectations, Cerner was punished again Tuesday by a Goldman Sachs downgrade. Cerner ( CERN ) stock was down more than 3%, near 50, in late-afternoon trading in the stock market today . Last week, shares touched a 21-month low of 49.89. Goldman Sachs analyst Robert Jones downgraded Cerner from buy to neutral and lowered its price target from 62 to 54, with a 3% upside potential. Cerner’s Q4 earnings beat, but its Q1 adjusted EPS guidance of 52 to 54 cents, on sales of $1.15 billion to $1.2 billion, slightly lagged at the midpoint the 54 cents and $1.178 billion consensus estimate of analysts polled by Thomson Reuters. The midpoint of guidance would mark a 22% year-over-year gain in EPS and a 27% gain in sales. Cerner also said Q1 new-business bookings would be flat with Q1 2015, at $1.15 billion to $1.25 billion. Last year’s Q1 bookings rose 32% from Q1 2014. Cerner’s is the largest pure-play health care information technology company in the U.S., competing with the IBM ‘s ( IBM ) Watson Health subsidiary, health care IT software from Oracle ( ORCL ) and others. “As the model increasingly transitions from faster-converting software to slower-converting services, we think it will take strong execution for CERN to maintain 10%/15% revenue/EPS growth,” Jones wrote. “With this backdrop, we think it is more appropriate to benchmark CERN to more mature software and IT outsourcing comps, which trade at 19 (times the next 12-month price/earnings).” Jones said he similarly analyzed Cerner’s smaller rival Allscripts Healthcare Solutions ( MDRX ) and decided to maintain his neutral rating and 13 price target, with 7% upside potential. Allscripts was up a fraction, above 12, Tuesday afternoon. Shares of both IBM and Oracle were down more than 1% Tuesday afternoon.