Q3 Earnings Preview for ServiceNow (NYSE:NOW)

in EARNINGS/INVESTING IDEAS by

ServiceNow, Inc. (NYSE:NOW) is scheduled to report Q3 earnings results on October 28, 2020.

The company is expected to report earnings of $1.03/share on revenue of $1.111 billion. The consensus earnings per share (EPS) of $1.03/share is based on a poll of 31 analysts and represents a growth in eps of 4.2% over the same quarter last year, when the company reported earnings of $0.99/share.

The revenue forecast of $1.111 billion based on a poll of 28 analysts implies a year-over-year (YoY) growth in revenue of 25.4%. Last year the company reported $885.8 million in revenue for the quarter.

Expected to report EPS growth of 4.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,110.84 $885.83 25.4%
EPS $1.03 $0.99 4.2%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from ServiceNow, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.02 $1.23 20.9% Beat
Q1, 2020 $0.95 $1.05 10.2% Beat
Q4, 2019 $0.87 $0.96 10.1% Beat
Q3, 2019 $0.89 $0.99 11.8% Beat
Q2, 2019 $0.64 $0.71 11.8% Beat
Q1, 2019 $0.54 $0.67 23.6% Beat
Q4, 2018 $0.63 $0.77 21.6% Beat
Q3, 2018 $0.59 $0.68 14.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 29, 2020 $435.04 $431.40 −0.8% Decline
April 29, 2020 $296 $351.54 18.8% Increase
January 29, 2020 $314.05 $341.62 8.8% Increase
October 23, 2019 $228.34 $237.78 4.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.71, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.71 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

ServiceNow, Inc. is currently trading at $518.19/share, down −0.7% for the day. The company is trading at approximately 97.2% of its 52-week high of $533.37/share. The company’s stock price is up 20.1% since the last earnings report and up 0.3% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 65.73 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:NOW Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 136.46 and a forward P/E multiple of 113.77.

ServiceNow, Inc.’s current share price also implies a price-to-book (P/B) multiple of 40.10. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $518.19
P/E Ratio 136.5x
P/E Ratio (Fwd) 113.8x
PEG Ratio 0.0
Total Debt / Total Capital 1.2%
Levered Free Cash Flow $1.129 billion
EV / EBITDA 198.3x

Finbox

ServiceNow, Inc. is a large-cap stock with a market capitalization of $99.389 billion and a total enterprise value of $98.245 billion. The company operates in the Information Technology sector and the Software industry.

ServiceNow, Inc. provides enterprise cloud computing solutions that defines, structures, consolidates, manages, and automates services for enterprises worldwide. The company offers information technology (IT) service management applications; and digital workflow products for customer service, human resources, security operations, integrated risk management, and other enterprise departments. It operates the Now platform that offers workflow automation, electronic service catalogs and portals, configuration management systems, data benchmarking, performance analytics, encryption, and collaboration and development tools. The company also provides IT service management product suite for enterprise’s employees, customers, and partners; IT operations management product that connects a customer’s physical and cloud-based IT infrastructure with applications and platforms; IT Asset Management product to automate IT asset lifecycles with workflows; IT business management product suite to manage IT priorities; and enterprise development operations product for developers’ toolchain. In addition, it offers customer service management product for customer service cases and requests; human resources service delivery product; security operations product for security operations management requirements of third-party; governance, risk, and compliance product to create policies and controls; and field service management application. Further, the company provides professional, training, and customer support services; and certification programs. It serves government, financial services, healthcare, telecommunications, manufacturing, IT services, technology, oil and gas, education, and consumer products. The company sells its products through direct sales team and resale partners. The company was formerly known as Service-now.com and changed its name to ServiceNow, Inc. in May 2012. The company was founded in 2004 and is headquartered in Santa Clara, California.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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