SAP Set to Report Q1 Earnings: Here's What You Should Know
SAP SE SAP is slated to report first-quarter 2023 results on Apr 21.
The Zacks Consensus Estimate for revenues is pegged at $7.97 billion, implying an improvement of 0.4% from the year-ago quarter’s reported figure. The consensus mark for earnings is pegged at $1.21 per share, indicating a year-over-year increase of 8%.
SAP reported fourth-quarter 2022 non-IFRS earnings of €1 ($1.02) per share, down 46% from the year-ago quarter’s levels. Tougher year-over-year comparisons pertaining to the contribution from Sapphire Ventures resulted in that downside. On the flip side, driven by strength in cloud business, SAP reported total revenues, on a non-IFRS basis, of €8.436 billion ($8.614 billion), up 6% year over year (up 1% at constant currency or cc).
SAP SE Price and EPS Surprise
SAP SE price-eps-surprise | SAP SE Quote
Factors to Note
SAP’s performance in the to-be-reported quarter is likely to have benefited from strong demand for its products and services. A robust cloud business bodes well. In the last reported quarter, the current cloud backlog — a key indicator of go-to-market success in cloud business — increased 27%.
The RISE with SAP solution will likely help the company to increase its market share in the cloud ERP solutions’ space and boost the adoption of its cloud-based solutions, such as SAP S/4HANA. In the last reported quarter, the solution was adopted by clients, including Al-Futtaim Group, City of Vancouver, ExxonMobil, Fujitsu Limited, German Football Association (DFB), Imperial Brands, Kanton Aargau, Lockheed Martin, Merck KGaA among others.
The company’s ongoing restructuring plan is expected to better align its operating models and go-to-market approach with its accelerated cloud transformation. As part of increasing focus on cloud operations, in March, SAP announced that it has agreed to sell its entire stake in Qualtrics to Silver Lake and Canada Pension Plan Investment Board. SAP had acquired Qualtrics in 2019.
The stake sale transaction has been approved by the Qualtrics board, including a committee of independent directors and the SAP Executive and Supervisory Boards. The transaction, subject to customary regulatory clearances, is expected to close in the second half of 2023. SAP will be presenting Qualtrics as a discontinued operation while reporting its first-quarter results.
SAP is also likely to have benefited from the growing momentum in SAP Business Technology Platform, and SAP Ariba and SAP Signavio solutions.
Apart from that, frequent product launches are likely to have boosted the top line. In March, the company announced the launch of Grow with SAP. The new offering is designed especially for midsize customers to adopt cloud ERP, and boost speed and predictability while fostering innovation.
However, global macroeconomic weakness, geopolitical instability and continued softness in software licenses are major headwinds for SAP. Stiff competition in the cloud space, and increasing research & development and sales & marketing expenses are added concerns.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for SAP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
SAP has an Earnings ESP of -1.93% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some stocks you may consider as our model shows that these have the right combination of elements to beat on earnings this season.
Meta Platforms META has an Earnings ESP of +8.00% and currently flaunts a Zacks Rank of 1. META is set to announce quarterly figures on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Meta’s to-be-reported quarter’s earnings and revenues is pegged at $1.97 per share and $27.49 billion, respectively. Shares of META are up 0.7% in the past year.
Spotify Technology SPOT has an Earnings ESP of +25.96% and presently carries a Zacks Rank #2. SPOT is slated to release quarterly numbers on Apr 25.
The Zacks Consensus Estimate is pegged at a loss of $1.04 per share and $3.36 billion for revenues, respectively. Shares of SPOT are down 2.6% in the past year.
Kimberly-Clark Corporation KMB has an Earnings ESP of +6.71% and currently has a Zacks Rank #2. KMB is scheduled to report quarterly earnings on Apr 25.
The Zacks Consensus Estimate for KMB’s to-be-reported quarter’s earnings and revenues is pegged at $1.31 per share and $5.08 billion, respectively. Shares of KMB are up 9.3% in the past year.
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