Taleo Earnings Preview

Taleo (Nasdaq: TLEO  ) met its estimates last quarter, but investors hope that it will beat them this quarter. The company will unveil its latest earnings on Tuesday, Feb. 14. Taleo and its subsidiaries provide on-demand talent management solutions that enable organizations of all sizes to assess, acquire, develop, and align their workforces for improved business performance.

What analysts say:

• Buy, sell, or hold?: Analysts strongly back Taleo, with 12 out of 19 rating it a buy and the remainder rating it a hold. Analysts like Taleo better than competitor Ultimate Software Group overall. Analysts still rate the stock a moderate buy, but they are a bit more wary about it compared to three months ago.
• Revenue forecasts: On average, analysts predict $86.8 million in revenue this quarter. That would represent a rise of 22% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.09 per share. Estimates range from $0.05 to $0.14.

What our community says:
CAPS All-Stars are solidly backing the stock, with 84.7% awarding it an outperform rating. Most of the community concurs with the All-Stars, with 84.7% granting it a rating of outperform. Fools are gung-ho about Taleo, though the message boards have been quiet lately, with only 55 posts in the past 30 days. Taleo's bearish CAPS rating of one out of five stars falls short of the Fool community sentiment.

Management:
The company's gross margin shrank by 2.1 percentage points in the last quarter. Revenue rose 41.2% while cost of sales rose 50.8% to $27.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Margins are a representation of how efficiently a company captures portions of sales dollars. The company's operating margins have been decreasing year over year for the last four quarters. Operating margins reflect the total sales revenue that the company retains after costs. Here is how Taleo has been doing for the last four quarters:

Quarter	Q3	Q2	Q1	Q4
Gross Margin	66.3%	66%	66%	65.8%
Operating Margin	(5.8%)	(12.1%)	(3.1%)	(8.7%)
Net Margin	(4.0%)	(11.6%)	(3.0%)	(0.9%)

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Earnings estimates provided by Zacks.