Jim Cramer on the market’s reaction to Salesforce’s fourth-quarter 2021 results

Salesforce earned $1.04 per share for its latest quarter, beating the consensus estimate of 75 cents a share. Revenue beat forecasts as well, however the business software giant gave a weaker-than-expected full-year profit forecast. Analysts are also expressing concern about…

Jim Cramer on the market's reaction to Salesforce's fourth-quarter 2021 results

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Salesforce earned $1.04 per share for its latest quarter, beating the consensus estimate of 75 cents a share. Revenue beat forecasts as well, however the business software giant gave a weaker-than-expected full-year profit forecast. Analysts are also expressing concern about the impact of the company’s acquisition of messaging platform Slack. CNBC’s Jim Cramer and David Faber discuss. Subscribe to CNBC PRO for access to investor and analyst insights: https://cnb.cx/2Vtntx6

Salesforce shares fell as much as 4% in extended trading on Thursday after the enterprise-software company issued earnings that exceeded analysts’ estimates, but Salesforce came up short on its full-year earnings forecast as it factors in the implications of buying team communication app Slack.

Here’s how the company did:

Earnings: $1.04 per share, adjusted, vs. 75 cents per share as expected by analysts, according to Refinitiv.
Revenue: $5.82 billion, vs. $5.68 billion as expected by analysts, according to Refinitiv.
Salesforce reported 20% year-over-year revenue growth in the fourth quarter of the company’s 2021 fiscal year, which ended on Jan. 31, according to a statement. In the previous quarter revenue grew 20%.

While revenue guidance for the full 2022 fiscal year surpassed estimates, earnings guidance was soft.

For the full year, which would include impact from Slack, the company called for $3.39 to $3.41 in adjusted earnings per share on $25.65 billion to $25.75 billion in revenue. That includes $600 million in revenue from Slack. (Separately on Thursday Slack said its preliminary revenue of $902.6 million in the year that ended on Jan. 31 was up 43%.) Analysts polled by Refinitiv had been anticipating $3.49 in adjusted earnings per share and $25.42 billion in revenue.

“We expect recent M&A will be a 63-cent headwind to non-GAAP diluted EPS,” Amy Weaver, Salesforce’s finance chief, said on a conference call with analysts, referring to the 2022 fiscal year.

Salesforce sees 88 cents to 89 cents in adjusted earnings per share in the fiscal first quarter on $5.875 billion to $5.885 billion in revenue. Analysts polled by Refinitiv had expected adjusted earnings of 76 cents per share on $5.72 billion in revenue.

In the fiscal fourth quarter, Salesforce generated $1.36 billion in subscription and support revenue from its key Sales Cloud product for tracking sales leads, translating into roughly 11% annualized growth, compared with 12% in the prior quarter. Acquisitions have helped Salesforce expand over the years, and the Tableau data visualization software Salesforce bought in 2019 contributed to Salesforce’s $1.81 billion in subscription and support revenue from Platform and Other products, up 26% and accelerating from 24% in the prior quarter.

In December Salesforce said it planned to acquire Slack for over $27 billion. Salesforce said it expects to close the deal late in the quarter that ends on July 31. Also in the quarter Salesforce announced Vaccine Cloud, a tool that government agencies and companies can use to manage deployment of coronavirus vaccines.

In the quarter, as the pandemic continued, Salesforce had $184 million in expenses because of ending certain real estate leases — more than the $80 million to $100 million range Salesforce had said to expect. “During the quarter, we identified further opportunities to consolidate and sublease across our global portfolio including in some of our hub locations,” Weaver said.

Salesforce had $18 billion in current remaining performance obligations at the end of the quarter, up 20%. Analysts polled by FactSet had expected 16% growth, and the growth rate was 20% in the previous quarter.

Notwithstanding the after-hours move, Salesforce shares have risen 4% since the start of 2021, while the S&P 500 index is up about 2%.

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