Brean Bullish On ServiceNow Heading Into Q3 Results

In a report issued Tuesday, Brean Capital analysts Sarah Hindlian and Frederick Havemeyer looked into ServiceNow ahead of its third-quarter earnings report, which they expect to be “solid […] with slight upside to both revenue and calculated billings.”

Specific Expectations

However, they also anticipate FX headwinds to remain substantial at approximately 9 percent to reported year-over-year growth rates, before falling to roughly half that rate in the fourth quarter and then becoming a minor tailwind in 2016.

Furthermore, margins continue to widen: management-guided, third-quarter operating margins of approximately 8 percent, up approximately 230bps year-over-year and approximately 150bps quarter-over-quarter.

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Brean’s checks suggest investors will see robust results for the third quarter, and that the fourth quarter is setting up to be sturdy as well, “with a robust deal pipeline from the company’s key Forbes 2000 customer base increasingly seeking broader adoption of the entire ServiceNow platform.”

Beyond Q3 Results

In fact, management has already issued implied guidance for the fourth quarter. However, the experts think the provided outlook leaves room for upside.

Consequently, the firm maintains a Buy rating and $96 price target on the stock, on the belief that “ServiceNow is a core holding for software investors seeking both robust revenue growth, and improving profitability.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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