Salesforce beats, stock up slightly

  • Salesforce topped estimates in guidance, earnings and revenue.
  • The company raised its guidance for its 2019 fiscal year.
Marc Benioff
Katie Kramer | CNBC
Marc Benioff

Salesforce stock rose 2 percent shortly after the company reported better-than-expected earnings for the fourth quarter of its 2018 fiscal year, which ended on Jan. 31, after the bell on Wednesday.

Here's how the company did:

  • Earnings: Excluding certain items, 35 cents in earnings per share vs. 33 cents as expected by analysts, according to Thomson Reuters.
  • Revenue: $2.85 billion vs. $2.81 billion as expected by analysts, according to Thomson Reuters.

For its full 2018 fiscal year, Salesforce had $1.35 in earnings per share, excluding certain items, on $10.48 billion in revenue, which was up 25 percent year over year, according to Wednesday's statement. Analysts had been expecting $1.34 in earnings per share and $10.44 billion in revenue for the full year, according to Thomson Reuters.

Salesforce gets most of its money from subscriptions and support, and with $2.66 billion in revenue there it exceeded the FactSet estimate of $2.59 billion, according to StreetAccount. But the company fell below expectations in the professional services segment, with $196 million, while analysts polled by FactSet had been expecting $218.2 million, according to StreetAccount.

The number of deals totaling more than $1 million was up 43 percent, Salesforce chief operating officer Keith Block said on the company's conference call with analysts after the earnings release. "Multiple industry sources have suggested to us that Salesforce seems to have achieved its internal sales goals well in advance of the end of the quarter," JMP Securities analysts Patrick Walravens and Mathew Spencer wrote in a Feb. 21 note.

In terms of guidance, Salesforce is expecting 43-44 cents in earnings per share, excluding certain items, on $2.925-2.935 billion in revenue. Analysts had expected Salesforce to forecast 37 cents, excluding certain items, on $2.9 billion in revenue, according to Thomson Reuters.

The company also raised its guidance by $150 million for the 2019 fiscal year, to $12.60-12.65 billion. (On the call CEO Marc Benioff said Salesforce had never raised its revenue guidance by that much.) The analyst consensus for revenue for the 2019 fiscal year was $12.55 billion.

Mizuho analysts Abhey Lamba and Parthiv Varadarajan thought the company would raise its revenue guidance for its 2019 fiscal year, they wrote in a Wednesday note. "Initial EPS outlook could indicate upside from a lower tax rate," the analysts wrote. Other tech companies, like Cisco and Intel, have said they expect lower tax rates as a result of recently enacted U.S. tax reform.

Salesforce estimates that its tax rate, excluding certain items, will be 21.5 percent for the entire 2019 fiscal year. In the 2018 fiscal year the equivalent rate was 34.5 percent, chief financial officer Mark Hawkins said on the call.

In the quarter Salesforce announced a strategic partnership with Google and deepened its IBM partnership. "We will use the correct provider at the correct time, whether that's us or whether that's Amazon, Google or IBM," Benioff said.

Salesforce stock is up about 14.5 percent since the beginning of the year, and it hit a new 52-week high during trading hours on Wednesday.

Programming Note: For more on Salesforce.com, watch "Mad Money" host Jim Cramer's interview with Chairman and CEO Marc Benioff tonight at 6 p.m. Eastern time.