Russia Charge: SAP Stock Finally Gives Up: SAP Weakens on Operating Margin and Earnings | news

The negative factor was the withdrawal of Russia in response to the invasion of Ukraine. According to SAP, this will also be reflected in sales and operating profit for the full year. However, management is sticking to the annual forecast issued at the end of January.

The company estimates the negative impact at €60 million in backlog and €70 million in non-IFRS operating income for the quarter, and €300 million in sales and €350 million in operating profit for the full year. In addition, SAP expects restructuring costs of 80 to 100 million euros for the current year.

Operating margin fell sharply to 23.7 percent, as operating profit fell while sales rose at the same time. Thus, it remained below market estimates of 25.6 percent and the prior year value of 27.4 percent. Margin figures and all other values ​​are not based on IFRS.

Profit after tax fell by a third to €1,166 million or €1.00 per share. In operating terms, SAP earned 3.5 percent less to €1.677 billion, with sales up 11.5 percent to €7.077 billion. Earnings figures were below consensus estimates, revenue was above.

Cloud revenue improved 31 percent to €2.82 billion, analysts had expected a 29 percent rise. The cloud backlog for a year (current cloud backlog) increased by 28 percent to €9.731 million, at the end of 2021 it was €9.45 billion. Growth in the core S/4HANA Cloud solution was particularly clear at 86 percent.

By Hans Joachim Koch

SAP Stock Under Pressure: Interest Rate Concerns, Earnings Fall

Software group SAP upset shareholders on Friday with a drop in first-quarter profit. However, analysts did not want to overestimate the impact on earnings. A tough trading environment for tech stocks was an added burden after US Federal Reserve Chairman Jerome Powell announced more aggressive interest rate hikes in the fight against high inflation the night before.

On Friday, SAP shares fell 2.00 percent through XETRA to a closing price of EUR 97.57.

Thus, Walldorfer’s share price fell back towards the support level around EUR95, which had risen repeatedly since the end of February. However, it was not enough for a lasting recovery. Below 95 euros, the range of a good 80 to 90 euros would come into focus. There have been several intermediate lows here since 2018. With a clearer drop below €90, even the uptrend that has existed since the global financial crisis of 2008 could falter.

In the first quarter, Europe’s largest software company was able to drive growth. However, investments in expanding the business with software for network use and the exit from Russia weighed on the result. The bottom line is that profits collapsed while sales surged.

“At first glance, the report looks disappointing,” DZ Bank analyst Armin Kremser wrote in an initial assessment. However, after deducting the burdens resulting from the actual Russian withdrawal, the picture looks better. Taking these effects into account, the operating result is almost at the level of market expectations.

In addition, the development of the cloud business is going according to plan, not outstanding, but very solid, the DZ Bank expert continued. The confirmation of the forecast for the whole year is also positive in view of the sales gap due to the interruption of activities in Russia. Overall, the opportunities and risks were balanced relative to the stock.

Despite the drop in share price, SAP weighs 118 billion euros, which means second place on the DAX. The Walldorf-based company is clearly lagging behind its US rival Salesforce. It has a market capitalization of almost 162,000 million euros. For comparison: at a record level of a good €143 in 2020, SAP took it to around €176 billion.


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