SAP tipped for strong 2015 results after solid renewals

German business software giant SAP is expected to hit the high-end of its 2015 operating profit forecast, helped by solid renewals of higher-margin licensed software.

The company has also benefited from a weaker euro and seen fast growth in sales of its newer internet-based software although that is less profitable than its licensed software.

SAP is due to announce its 2015 results and outlook for 2016 on 22 January but analysts expect it will pre-release operating profit and some other 2015 figures next week.

SAP declined to comment.

Investors had doubts last year about the company's transition to cloud software until third-quarter results showed it was going much better than expected, sending SAP shares up to a record high by late November.

Chief executive Bill McDermott said in October that the company was "feeling good" about its capacity to meet its full-year financial targets and that it certainly had a chance to "outrun" these targets.

Heading into the end of last year, SAP stood by its full-year forecast for operating profit, in constant currencies, of €5.6 billion-€5.9 billion euros (A$8.8-9.3 billion), compared with 2014's €5.6 billion.

Once the effect of the weaker euro against other currencies is factored into the mix, SAP targets operating profit of €6-6.4 billion.

On that basis, a Reuters poll of 15 analysts forecast a €6.3 billion operating profit, excluding special items, with individual estimates ranging from €6.25 billion to €6.52 billion.

SAP, whose customers include many of the world's biggest multinationals, specialises in business applications ranging from accounting to human resources to supply-chain management.

Total 2015 revenue is expected to reach €20.5 billion, according to the Reuters poll, up 16.7 percent from €17.6 billion in 2014, reflecting currency effects.

SAP targeted an increase in cloud and software revenue of 8-10 percent in constant currencies in 2015, and that revenue was already up by 11 percent in the first nine months of the year.

Analysts say the swing factor will be how sales of licences of SAP's classic packaged software performed in the fourth quarter.

"If licences maintain that better-than-expected trajectory in Q4 and approach stability in 2016 (as we expect), we see upside continuing," brokerage UBS said of the prospects for further stock gains, in a note to clients this week.

UBS recommends investors continue to buy SAP shares, which hit a record high of €75.75  on 3 December and were trading at €71.39 euros on Friday. They gained 27 percent in 2015, twice as much as the European technology index's 14 percent rise.

Reporting by Harros Ten Wolde. Additional reporting by Eric Auchard.